7 Top Investment Strategies for the New Year

More than at any time in the last 18 months, investors need a winning investment strategy to be highly successful. In the second half of 2020, and to a lesser extent in 2021, picking the winning stocks was fairly easy as many domineering stocks continued to rise steadily. Last year, shorting overvalued tech stocks and buying oil stocks was an easy, winning strategy. I’m bullish on stocks this year, but investors think he’ll have to really contend with the 2023 “stock picker” market. Over the years, even within the same sector, stocks will perform significantly differently. And of course some sectors perform much better than others. In such an environment, knowing and leveraging top investment strategies is extremely important.

Here are the top seven investment strategies investors can use to succeed in 2023. Some were developed by me and have been successful in the past, while others were created by Wall Street and utilized by some of Wall Street’s major investors. decades.

follow the agenda of the most powerful government

The world’s largest government has at least three very powerful tools. It’s the law, a huge staff, and a huge amount of money.

So if most or all of the world’s largest governments adopt a sector or technology, it has a very good chance of thriving. As a result, many or most of the largest companies in the industry, or technology providers, are likely to achieve great success.
For example, I have used this strategy in the past to profit from defense companies, solar energy companies, casino operators and the cybersecurity sector. Going forward, this principle keeps me optimistic about the latter sector, as well as some electric vehicle manufacturers and some companies involved in hydrogen.

By the way, the reverse of this principle is also true. In other words, if a strong government vehemently opposes a sector or technology, it is unlikely to succeed. have seen it unfold. And because of this principle, I’m somewhat bearish about the long-term outlook for oil companies.

Follow the “big money” and insiders

I think it’s a very good bet that large institutional investors have access to expertise and information about individual companies that retail investors sometimes lack. For example, institutional investors have access to analyst reports on companies that most retail investors cannot see. A large investor can also speak individually with board members, the CFO, and even her CEO to get “color” on the company’s outlook.

And, of course, corporate insiders – board members and executives – have access to vast amounts of non-public information about their company’s performance and prospects.

Therefore, it makes sense and works to buy the same stocks that insiders of large institutions and companies are buying.

Nasdaq.com We have comprehensive and accessible data on stocks bought by insiders and large institutions. investor place They also often publish stories containing that information.

Dollar cost averaging/bearish buying

Streets often underestimate the value of great companies and sectors. This is either because they haven’t delivered strong quarterly results or because macroeconomic conditions aren’t favorable.

For example, in the last 15 years, Amazon (Nasdaq:AMZN), alphabet (Nasdaq:googNasdaq:Google)When netflix (Nasdaq:NFLX) were all shunned by the streets for a variety of reasons, but made a big comeback in the years that followed. and see how sharply it fell early in the pandemic. Finally, many solar stocks surged sharply after his 2016-his 2018 sharp plunge.

Those who bought shares in blue-chip companies and sectors shunned from the streets and held them until they soared made big profits. Buying more stocks when the stocks you already own have plummeted is called “dollar cost averaging”. This is because taking that action will reduce the average price at which you bought that stock.

Buying stocks after the stock price has fallen, whether you hold it or not, is called bearishly buying stocks. More recently, this strategy has become more commonly known as “buying dips.”

CAN SLIM method

In the CAN SLIM method, investors I have to buy Shares of companies that meet a set of criteria.

For example, this method requires investors to buy only shares of companies that are leaders in their sector, have growing earnings, and are widely bought by institutional investors. Additionally, CAN SLIM advises investors to only buy stocks when the market is rising.

Generally, this method is used to identify growth stocks rather than value names.

investor business dailyfounded by the inventor of the CAN SLIM system and promotion With this method, investors are advised to sell the stock if it has fallen 7-8% from the time they bought it. The website also usually recommends selling the stock after making a profit of 20-25%.

Identify important trends not reflected in stocks

For a variety of reasons, significant developments globally, in the United States, or in specific sectors may not be reflected in equities for an extended period of time.

For example, in a recent column, i pointed it outt master Card (New York Stock Exchange:MA) was reporting “U.S. Holidays”. Sales jumped 7.6% Clothing spending increased 4.4%, restaurant spending increased 15%, and overall online spending increased 10.6%. ”

Consumer Discretionary Stocks are clearly experiencing strong consumer spending as many on the streets still believe that the fate of the US economy and US corporate earnings depends solely on the Federal Reserve. does not reflect Indeed, most of these name valuations are searing a strong downward trend in consumer spending that has clearly not occurred and, given the strength of the labor market and wages, probably will not occur this year. It probably makes sense to buy shares in companies with strong consumer goods discretion. Macy’s (New York Stock Exchange:M.), Amazon (Nasdaq:AMZN), and BLinker International (New York Stock Exchange:eat).

Similarly, due to macro trend concerns and relatively small setbacks. Tesla (Nasdaq:TSLA), currently, I believe most EV stocks do not reflect the huge boost the sector is ready to receive from the tax credit from EV.

Anticipate developments that are likely to occur but have not yet been reflected in stocks

This method is similar to the previous method, but is riskier, potentially lucrative, and offers more opportunities for investors.

In many cases, a 70% to 80% likely development is not reflected in the stock. This is because institutional investors either do not believe such things will happen or do not want to take advantage of the possibility that they will not.

For example, it was fairly clear that China would not continue its coronavirus lockdown well beyond the end of this year due to its devastating impact on its economy. stocks reflected little to no likelihood that the lockdown would end anytime soon. So it would make sense for investors to buy Chinese stocks or ETFs at that point.

Likewise, as I pointed out in my last column, there are some pretty strong indications that the war between Ukraine and Russia will end in the medium term. But that scenario doesn’t seem to be reflected in equities. As a result, it makes sense to buy some European stocks and ETFs that are likely to benefit from such developments.

Follow the Way of Great Investors

Many good investors have established criteria they use in deciding which stocks to buy and have published these criteria.

Benjamin Graham, widely regarded as the inspiration for many of Warren Buffett’s ideas, emphasized the importance of buying defensive stocks at low and attractive valuations. He advised investors to put less weight on the opinions of equity analysts and listen to them.

Peter Lynch, who made a lot of money in stocks in the 1970s, told investors to buy stocks in mid-to-large companies whose earnings were growing 10% to 19% each year. He also looks for companies whose price-to-earnings ratio is 50% or less of his growth plus dividend yield. Lynch also doesn’t like manufacturing companies whose inventories are growing faster than their sales, and believes investors should only buy shares in companies with little or no debt.

Finally, well-known investor Ken Fisher strongly believes in buying stocks in companies with low price-to-sales ratios. He believes such companies are “popular relative to their size” and can easily increase their profits.

Readers interested in learning more about these and other great investor methods can purchase this book. master of the market Information in this section is by John Reese and Todd Glassman.

As of the date of publication, Larry Reimer did not hold any positions (directly or indirectly) in the securities referenced in this article. The opinions expressed in this article are those of the subject author of InvestorPlace.com. Publication guidelines.