Concentrate Your Portfolio to Few Stocks
Conventional wisdom suggests that one should diversify their stock portfolio. That's what most financial advisors recommend to investors. According to IBD (Investors Business Daily) methodology, that is a sure way to get a mediocre performance. If you want to Out Perform the Market by investing and trading the Growth Stocks, you must identify the leaders early on and get rid of the laggards. Utilize that money from the laggards to concentrate your position into the leading stocks with a second position instead. Diversifying in actuality is increasing the risk by being exposed to many stocks. It's better to concentrate your portfolio to the few leading stocks that have proved their worth by leading the market.
We had a "Follow Thru" day identified when the market closed on Friday January 4th. That's the signal to retail investors to start taking a small trial testing position on leading stocks. Several small positions should have been initiated on Monday January 7th. Stocks have been known to just take off on a very successful "Follow Thru" day. It's not unusual for the leading stocks to quickly gain +15% to +20% within 3 weeks. There were 18 stocks that I had mentioned in my blog post on January 13th. Initial test positions were taken at market open on Monday January 7th. By January 16th, 6 stocks were leading the pack and a second position was initiated into those leading stocks on that day. Here is the performance of those 6 stocks in the last 4 weeks as well as the performance of the leading Growth Stock Index $QQQ:
- $CYBR ... +26.73%
- $BEAT ... +24.62%
- $MEDP ... +23.74%
- $VEEV ... +23.68%
- $ALRM ... +21.21%
- $TTD ... +21.13%
- $QQQ ... +9.74%
Average performance for 6 stocks: +23.52% (4 weeks)
Average performance for 6 stocks: + 9.23% (2 weeks 3 days for second position)
Average performance for 6 stocks: +16.38% (both 1st and 2nd positions combined)
Average performance for 18 stocks: +13.49% (4 weeks)
Concentrating the portfolio to just 6 leading stocks and getting rid of the laggards resulted in outperforming the leading Growth Stock index $QQQ by 2.42 times. It also outperformed the portfolio of initial 18 stocks by 1.74 times.
Happy Trading!
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