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Stock Market Leadership is Getting Narrow, and the Tide Is No Longer Rising

We all know the expression, “A rising tide lifts all boats.” Last year we saw such an unusual broad-based stock market advance that every sector participated on the upside. Now we are
  • 2 min Read

By Jordan Kimmel

Jordan Kimmel is a Portfolio Manager for Gitterman Wealth Management. Phone: 848-248-4290Email: [email protected] With over 30 years of experience in the financial services industry, both as a retail broker and fund / portfolio manager, Jordan is the creator of the FACTS® Stock Selection Process, which employs a unique holistic and quantitative analysis on the integrity and sustainability of over 2,000 US companies. Jordan’s FACTS® method identifies organizations with: Financial Strength Accounting Conservativeness Corporate Integrity Transparency Sustainability / ESG (Environmental, Social, and Governance) Metrics FACTS® analyzes the largest and most liquid companies, and also incorporates Jordan’s Magnet® Investment Strategy, one of the first strategies of its kind to combine the best tenets of value, growth, and momentum of company fundamentals. Magnet® has been licensed to several leading institutions around the country, and Jordan appears frequently on several major financial TV networks, including CNBC, Fox Business, Bloomberg, and ABC News, among others. He has also been quoted extensively in several publications, including Forbes, The Wall Street Journal, and U.S. News & World Report. He is the author of two books, the most recent being “The Magnet Method of Investing.” (Wiley, 2009).
Jordan Kimmel is a Portfolio Manager for Gitterman Wealth Management. Phone: 848-248-4290Email: [email protected] With over 30 years of experience in the financial services industry, both as a retail broker and fund / portfolio manager, Jordan is the creator of the FACTS® Stock Selection Process, which employs a unique holistic and quantitative analysis on the integrity and sustainability of over 2,000 US companies. Jordan’s FACTS® method identifies organizations with: Financial Strength Accounting Conservativeness Corporate Integrity Transparency Sustainability / ESG (Environmental, Social, and Governance) Metrics FACTS® analyzes the largest and most liquid companies, and also incorporates Jordan’s Magnet® Investment Strategy, one of the first strategies of its kind to combine the best tenets of value, growth, and momentum of company fundamentals. Magnet® has been licensed to several leading institutions around the country, and Jordan appears frequently on several major financial TV networks, including CNBC, Fox Business, Bloomberg, and ABC News, among others. He has also been quoted extensively in several publications, including Forbes, The Wall Street Journal, and U.S. News & World Report. He is the author of two books, the most recent being “The Magnet Method of Investing.” (Wiley, 2009).

We all know the expression, “A rising tide lifts all boats.” Last year we saw such an unusual broad-based stock market advance that every sector participated on the upside. Now we are seeing leadership getting narrow and finding stocks I want to invest in is getting harder. The leadership is coming from mostly momentum stocks that do not rank highly on my Magnet® model, and to me that is a bad omen. The advance/decline has deteriorated and that is another bad sign for the short-term health of the market. Small-cap stocks are getting hit hard while mega-cap stocks have kept the market looking stronger than it is. I have been saying for a while the market needs and is finally set up for a real correction. I am not suggesting a bear market is around the corner. I think we are just seeing a high tide going out. As I have mentioned in recent articles, I think the market will rest or even correct, but will only be setting up for another run significantly higher.

It is not hard to identify stock hitting new highs. All you need to do the look at the list. But when I run them through my Magnet model, I am just finding most do not trade at the value levels I need to get invested in them.

I have invested in a few new longs that meet all the Magnet criteria, but selectively is the real key as leadership has clearly become narrow.

Longs: Emerge Energy Services LP (EMES) , Hi-Crush Partners LP (HCLP) , Canadian Solar Inc. (CSIQ) , Omega Protein Corp. (OME)

Shorts- NetSuite Inc. (N), Chico's FAS Inc. (CHS), ViaSat Inc. (VSAT)

By Jordan Kimmel, Chief Investment Officer at Investview, Inc. (INVU).

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