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Kevin Cook here to start the week off for Steve...
Have you heard market bears say that the only thing driving stocks to new highs - besides QE money-printing - is short-covering? It's an easy ploy to fall for and I want to make sure you are never susceptible to this lazy, bitter thinking.
First of all, there are trillions of investment dollars chasing a few thousand quality companies that may or may not deserve them. Second, the investment thesis of the portfolio managers doing the stock-picking begins and ends with forward views of the economy and earnings.
So they are "heads down picking stocks" as I like to say. And if they are not, guess what happens? That dip they waited for, and then stared at below S&P 1600, quickly got away from them. This creates the performance-chasing you saw last week where they "HAD TO BUY!"
Bottom line: The S&P will likely have another pullback to 1650 before we hit 1750 this year. But what it's already beginning to trade on besides Q2 earnings is this simple math: 2014 EPS estimates of $110-115 X a P/E multiple of 16 = S&P 1,800. You can take that to the bank.
Just press a button and PRESTO - out pops the list of stocks from a market-beating strategy. In fact, since 2001, one screen has averaged a yearly gain of +67.4%. Even during 2008, while the market plunged -37.0%, those picks were up +15.3%.
Investors marvel that it's "like a license to print money." "No benchmark stands a chance!" Why wait another day?
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