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Want a Better Portfolio? Pick the Best Players

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Want a Better Portfolio? Pick the Best Players

By Ben Jones, Sr. Analyst, Dorsey, Wright & Associates, a Nasdaq Company

Ah, “the thrill of victory and the agony of defeat.” For the next two weeks, millions of people will watch as the world’s top athletes compete for the gold. Whatever the final standings, every man and woman who has earned one of the few coveted spots on their country’s team is thrilled to be where they are today. The honor is not only the culmination of years (or even an entire lifetime) of hard work and dedication, but it is also dependent on each athlete’s current performance. Right here. Right now.

While investing may not share the same level of personal drama as international competitions, choosing the best stocks within your portfolio should follow a selection process that’s just as rigorous, and the ultimate winners should be chosen based on how they perform against the competition. Right here. Right now. Just like top athletes, to remain on the team, each stock has to continue to win the “heat,” outpacing the competition, including direct competitors in their own industry, as well as stocks in other sectors. Companies in technology, basic materials, energy, financials, and more are in a constant battle every day, and it’s anyone’s guess which sectors and which stocks will be next year’s—or even next week’s—winners.

Fortunately, at Dorsey, Wright & Associates, a Nasdaq Company, we use a methodology that simplifies the process of identifying the strongest stocks to make it easier than ever to pick the best players. By focusing on two specific traits, momentum (which is synonymous to relative strength) and trend, we identify today’s winners, while sending off those stocks that are losing momentum or trending downward to watch from the stands. The competition is fierce, and with new players constantly entering the field, every stock has to remain at peak performance to earn their spot.

As we head into late summer, now is the perfect time to get out of the heat and sit down to take a good look at your own portfolio to determine which players are performing well, and to pick the best of the best to take full advantage of the recent market upswing. Throughout most of July, markets were rather quiet, as volatility fell to a 2016 low, and the indexes ended the month on a high note with the S&P 500 up about 6.5% year to date—a surprising turnaround after June’s volatility. What seems to bode well for the coming months is the fact the it’s not only large caps that are driving the market today, but a nice mix of small and mid caps are also continuing to push the indexes higher. In addition, commodities are continuing to trend positive, with gold and silver leading the way.

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Of course, it wouldn’t be right to talk about the games without mentioning what’s happening at the moment in emerging markets—especially in Brazil. Brazil’s benchmark Bovespa BVSP has been setting its own records, surging 31% year to date, and the country is now leading not only its Latin America competitors, but is even earning its spot as the frontrunner of all emerging markets. Peru and Asia Pacific are also running like winners, making emerging markets a bit of an underdog in the market this summer.

All of these developments are adding up to making today an ideal time to re-focus on wealth accumulation. Don’t let the top athletes be the only winners in the coming weeks. Take a close look at your portfolio, focus on the trends, and take advantage of those stocks and asset classes that are showing strength. Right here. Right now.

Read more from Nasdaq Global Indexes.

To learn more about the DWA Technical Research platform, click here to take a free 21-day trial. To learn more about Relative Strength and the Dorsey Wright Relative Strength strategies, download the whitepaper Point & Figure Relative Strength Signals or contact us here.

The relative strength strategy is not a guarantee. There may be times where all investments or asset classes are unfavorable and depreciate in value. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss. 
The information contained herein has been prepared without regard to any particular investor’s investment objectives, financial situation, and needs. Accordingly, investors should not act on any recommendation (express or implied) or information in this material without obtaining specific advice from their financial advisors and should not rely on information herein as the primary basis for their investment decisions. 
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