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Weekend Wisdom

I know you don't want to hear this. But 2014 is playing out just as it should. Meaning that the big money from this 5 year bull market has already been made and valuations are fully engorged. Gladly, there is not much fear of a bear market either as economic data remains positive.

When you add it all up, it says the bull market is still on. Just that the pace of gains is slowing down to the 5-10% per year range.

I can appreciate why that doesn't get your heart racing. But compared to the unspectacular returns for cash, bonds, precious metals and real estate, it is a pretty fair shake.

So best that you keep throwing your hat in the stock market ring. And best that you look for the right ingredients in your stock portfolio to generate even more attractive returns. Below I share with you the 4 essential ingredients at this time.


Ingredient #1: Value

In March, April and early May investors squeezed the excess premium from overpriced glamour stocks such as:

• Tesla's engine sputtered by 30%.
• Yelp cried for help falling nearly 50%.
• FireEye got lit up for a 74% scorching.

This was actually a healthy sign as it says investors would not stand for these excesses any longer. Quite simply it was a call for value.

Note that I am from the camp that believes value investing always makes sense. Yet now there is a much more severe punishment awaiting those who miss that memo.

More...


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Monday Deadline for Steve's Personal Trades

Zacks' most popular trading portfolio had been closed to new investors. But today you can get in on the 10 trades that Zacks.com chief Steve Reitmeister has put his own money into.

Last year, he scored a market-thumping gain of +39.2%. Yet it only costs a total of $1 to follow his real-time trades (and those of all other Zacks experts) for 30 days. Please note: Steve's portfolio is in such demand that we must limit the number of investors who access it. Your deadline for entry is Monday, June 23.

See his 10 must-buy stocks today >>

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Ingredient #2: Positive Estimate Revisions

You knew that I was going to say this as it is the power behind the Zacks Rank and its 26% average annual return. Let's speed up the discussion and simply say that positive estimate revisions give you an edge in every market environment. That's because these are the companies with the healthiest growth prospects, which is a beacon signaling investors towards the shares.


Ingredient #3: Dividend Income

If the market is only going to provide capital gains of 5-10% per year, then getting a 2-4% dividend yield on top makes a BIG difference. I am not saying that every pick in your portfolio needs to supply dividend income. Rather, take a look at your total portfolio and make sure you have enough positions that supply this edge.

WARNING: There is still some risk that bond rates will continue to rise as QE goes away and the economy heats up. This will be bad news for stocks whose ONLY attractive quality is a big dividend check. Make sure you go the growth and income route for your picks as not to be overly harmed by this potential outcome.


Ingredient #4: Dash of Market Timing

Market timing was a route to failure in 2013 as stocks just went up, up and up. 2014 is marked by more range bound trading, which gives market timers a good chance to squeeze out extra gains.

As stocks break to new highs, then take some profits off the table. Even consider a small ETF short position or VIX play to profit from a likely market pullback. Then ratchet back up to 100% long for the next leg higher.

If you don't have a good track record with market timing, then either just stay long until there is reason to be concerned about a forthcoming bear market. Or consider joining a service like Zacks Market Timer or my Reitmeister Trading Alert to help you navigate these moves.


Where to Find the Best Stocks Now?

The above ingredients will get you on the right track. However, in a world with over 10,000 stocks to choose from, far too many will seem to fit the bill.

That may be fine if you are a professional investor with 60-80 hours per week to focus on researching the full list. For the rest of you, it's usually better to consider a hand-selected group of these stocks that you can more easily put into your portfolio.

Today, I will show you what I put into my own portfolio. It currently has 10 stocks that fit the bill, and I am lining up an 11th to add at just the right time. These are the same positions I put my own family's money into and you are welcome to share them through my Reitmeister Trading Alert.

Normally this portfolio is closed to new members but it was recently opened again. In fact, you are invited to follow its real-time trades for the next 30 days (and those of all other Zacks portfolios) for the total sum of just $1. If you want to learn more, then best do so now because it closes up again in a matter of hours, Monday, June 23rd at midnight.

See the Reitmeister Trading Alert Portfolio >>

Wishing you great financial success,

Steve

Steve Reitmeister has been with Zacks since 1999 and currently serves as the Executive Vice President in charge of Zacks.com and all of its leading products for individual investors. He is also the Editor of the Reitmeister Trading Alert.

 

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