I’ve been waiting for the right moment to offload a position, and this week’s upside stock market action provided a great opportunity.
When you compare the leading large-cap stocks against one another, banks are clearly lagging.
So today I exited a smallish position in Bank of America (NYSE: BAC), selling into the buying frenzy, after the October CPI number provided an excuse for Wall Street to load up on stocks.
On Twitter I wrote:
Inflation falls and stocks rise because the market believes that the Fed is closer to being done with hiking rates. I’ve been long large-cap tech for some time but I’m now extremely mindful that this market is weakening as it goes higher. But for today, I’ll take the W
Thankfully the Bank of America position was in profit but I’m just not interested in market laggards.
From the beginning of 2022 till today, Bank of America has seen its value decline by 40%.
Not good enough, especially when you think of how well tech has played out over recent years.
It reminded me of Mark Minervini’s idea of ‘super performance stocks’ in Trade Like a Stock Market Wizard:
My favourite type of stock to invest in – the area where I have made most of my money trading – is the market leader. These companies are able to grow their earnings the fastest. An industry’s strongest players are usually number one, two, or threein sales and earnings and are gaining market share. Market leaders are easy to spot, but most investors have a psychological difficulty deciding to buy them. The share prices of market leaders power up the most percentage wise in the initial stages of a market rally. They move into new high ground first. That unbeleivable price strength causes most investors to think that these stocks have run up too far; hence, most investors are afraid to buy the very best stocks capable of superperformance.
Mark’s book is excellent if you haven’t read it already.
The upshot is that in the first week of November, I initiated a new position in an index fund that basically tracks the NASDAQ 100, chickening out of buying an individual high-performing tech stock.
I really like the idea ‘superperformers’, preferring to hold a superperforming index.