I assume that we will have a major market bottom sooner or later. And often some really garbage stocks will rocket after a major bottom. (I believe I owe this insight to Mungofitch during the 2009 meltdown.) Any ideas how to find stocks like that so to be prepared? It looks like it took Ford (F) about 21 months to top out after it bottomed in the aforementioned 2009 crash to go from $2 to $15. There are a lot of garbage stocks that probably won’t rip higher, so any wisdom would be appreciated.
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I assume that we will have a major market bottom sooner or later. And often some really garbage stocks will rocket after a major bottom. (I believe I owe this insight to Mungofitch during the 2009 meltdown.)
Actually Zeelotes is the one who did the strong research on that, though it’s not a big secret.
Any ideas how to find stocks like that so to be prepared?
Two main criteria that have worked in the past:
-
The dead cat rule. Those that fell the most from their 52 weeks highs are the ones which soar the fastest after a major market bottom…for a while.
Gut feel? don’t do that for more than 6 weeks. -
The junk rule. The posted VL short screens are great for finding picks to go long at that time.
It makes no sense, but it always seems to work great.
I’ve known it since before the last 2-3 times it was useful, but I can never bring myself to do it.
My own suggestion is momentum based:
We assume you’re not buying the day of the bottom, but at least a day or a few days later when the rebound is clear.
Among those that fell the most prior to the bottom, narrow it down to those that are already soaring the most since their respective 52 week lows.
In effect, if the bottom is (say) March 9, keep using the final sort “total return since March 9”.
All of this presupposes you have confidence that the bottom is done.
Another anecdote:
Among better quality securities, depending on the nature of the market crash, banks are typically a
leading sector for the first 2-3 months then give up leadership to other things.
Jim
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Any ideas how to find stocks like that so to be prepared?
Zeelotes had great results going long the picks from short screens.
For example:
The Best MI from a Bottom Signal
https://discussion.fool.com/the-best-mi-from-a-bottom-signal-271…
MI from Bottoms?
https://discussion.fool.com/mi-from-bottoms-27714240.aspx
DB2
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Jim:“…
My own suggestion is momentum based:
We assume you’re not buying the day of the bottom, but at least a day or a few days later when the rebound is clear.
Among those that fell the most prior to the bottom, narrow it down to those that are already soaring the most since their respective 52 week lows.
In effect, if the bottom is (say) March 9, keep using the final sort “total return since March 9”.
…”
Jim, what do you think about ARKK ETF by Cathi Wood.
Jim, what do you think about ARKK ETF by Cathi Wood.
If you can’t say anything nice, don’t say anything at all.
If I knew it in more depth I could probably find something nice to say.
I’m a glass half full kind of person, after all.
It has had a positive return since mid December 2017, for example. CAGR 0.75%. Would have been twice that without the fees.
For example:
I could say nice things about SARK, which I suggested shortly after it opened.
It’s perhaps the world’s most insulting ETF: they short whatever ARKK buys.
Up 130% since its inception last November. Ummm…CAGR 317%.
Probably OK to take profits on that.
Jim
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SARK… they short whatever ARKK buys <<
Now that’s interesting. I am having since quite a while ARKK puts with which I am very pleased. I intend to continue to hold but maybe that’s an interesting alternative as it would mean leaving the hassle of caring about expiry dates, time value, rolling out etc. to others 
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>> SARK… they short whatever ARKK buys <<
…
Now that’s interesting. I am having since quite a while ARKK puts
The problem is that the ARKK people are in fact trying to do well, so not everything in there is stuff you’d want to bet against.
My pick of a vehicle for playing against the recent bubbles was to short, or buy puts against, SPAK, an ETF tracking the recent SPAC listings.
It’s hard to say with a straight face that those firms were intended to do well.
Here’s a post of mine from 14 months ago when someone on the Berkshire board asked for suggestions on how to (you guessed it) short ARKK.
I suggested SPAK/SPXZ/SPCX.
https://discussion.fool.com/how-do-you-bet-against-arkk-to-bet-a…
Two of the three tickers I floated have tanked nicely. SPAK is down 49%.
But for some reason SPXZ has held up; I haven’t looked closely enough to figure out why.
Did they sit on cash or hedge somehow? Or were they just smart enough to pick the few resilient ones? If so, kudos.
Jim
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SPACs are interesting in that money sits in trust until target is located. Holders have the right to redeem at $10 rather than participating. The money sits in short term treasuries, so owning below $10 is viewed by fixed income guys as a discount of floating rate treasuries.
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