Markets

Where to Focus in These Volatile Markets

By John Del Vecchio  |  November 9, 2018

Last week, I talked about how “good value” means “reduced risk.”

At the time, markets were pretty unsettled. We’d seen a 900-point intraday swing for the Dow Jones Industrial Average and a trip from Monday lows of 24,122.23 to Friday highs of 25,578.98.

Now, even with a crazy midterm election reaching its climax, we’re on pace for the best week for the stock market in eight or nine months.

I’m still looking at the same signals, though.

And what I see tells me it’s still all about what real companies do on the ground and whether that translates into more cash.

Here’s something else I wrote last week: “Management has to execute… and execute… and execute… to justify higher prices.”

Stocks are going up, and the rally’s legs seem refreshed.

And here’s how I think of it: If something was already overvalued, there’s not a lot of good time spent doing new math.

Where My Focus Remains

So, my focus remains on revenue, earnings, cash flow, and identifying what’s real and what’s fake.

You wouldn’t believe how entertaining that can be… especially during those moments when everyone else’s hair is on fire.

I’ve heard it come up in a couple different contexts recently; I don’t recall exactly when and where, but it does strike me, because I’m not really a war analogy guy. Only war is war.

Napoleon made a great point when he said, “The true genius in war is the one who can do the average thing when all those around him are going crazy.”

It’s just not my nature to go crazy (unless, of course, A.I. can’t even get the beer taps straight…)

So, I’m taking a look at the whole Hidden Profits model portfolio with two questions in mind:

  • Is it a good value?
  • Is it a unique opportunity?

We’re about taking as much emotion out of this process as we can. The investor who wants to get rich has to do that.

And this is The Rich Investor. “Systems” are what we do.

Numbers in Pictures

Good times are rolling again.

But I stand by another thing I shared last week: Market action is changing.

Here’s a little “election day secret” almost literally nobody else has talked about – and it’s got “catalyst” written all over it…

Take a look at this chart. It shows how many companies have been in the “blackout” period for announcing stock buybacks.

The tipping point is around November 6 – as in “Midterm Day.”

Let’s see if we start to see a lot of fresh buyback announcements. A steady stream could support stock prices.

Buybacks have certainly been a key driver of stock performance since the market bottom in 2009.

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John Del Vecchio

John Del Vecchio is the author of the bestselling book, Rule of 72: Compound Your Money and Uncover Hidden Stock Profits and What’s Behind The Numbers: A Guide To Exposing Financial Chicanery And Avoiding Huge Losses In Your Portfolio.

As the in-house stock market guru and forensic accountant for Dent Research, John stood on the shoulders of the great David Tice, James O’Shaughnessy and Dr. Howard Schilit, and built a framework of algorithms and a multi-factor grading system that has made him one of the more successful short-sellers around.

John is also the executive editor of our Hidden Profits newsletter and our trading service Small Cap All-Stars.

He graduated Summa Cum Laude from Bryant College with a B.S. in Finance and was awarded Beta Gamma Sigma honors. He earned the right to use the Chartered Financial Analyst designation in September 2001.MORE FROM AUTHOR