2019 was a great year for the stock market – one of the strongest years ever.
And typically, following that sort of performance, the next year is great too.
So, while nothing is ever guaranteed when it comes to the market… the odds are pretty good 2020 will be another bullish year.
But – and this is important to understand – we likely won’t see that great performance in the exact same sectors…
Semiconductor stocks were the top performers in 2019. Advanced Micro Devices (AMD) gained 152%. Lam Research (LRCX) popped 116% higher. Applied Materials (AMAT) jumped 88%.
But, it probably won’t be the big winners of 2019 that lead the market higher this year.
Instead, traders should look for the laggards to play catch-up.
No doubt, 2019 was a momentum-driven market. Strong stocks got stronger throughout the year. Weak stocks got weaker. And, that trend accelerated in December as institutions and money managers engaged
in the art of “window dressing.”
They bought more of the market’s best-performing stocks so when they published their holdings at the end of the year, they could show investors they owned the markets best performers. And, they sold off the worst-performing stocks so they could show investors their limited exposure to bad performers.
That action has created one of the widest valuation discrepancies between growth stocks and value stocks since 2000.
You see, on a relative basis, growth stocks are historically expensive today… and value stocks are historically cheap.
AMD, for example, trades at 44 times 2020 earnings estimates. That’s quite richly valued compared to the S&P 500, which trades for about 18 times 2020 earnings estimates.
Meanwhile, value stocks like Teva Pharmaceuticals (TEVA), which trades at less than 4 times 2020 earnings estimates, are historically cheap.
Granted… TEVA has its issues, and the outlook is cloudy. And, AMD is firing on all cylinders and the future is shining bright.
But gosh… is AMD really worth ten times the earnings multiple of TEVA – or any other company that actually has earnings?
My point is… the valuation gap between growth and value has expanded to a historically wide level. Growth stocks are trading for historically high valuations. Value stocks are historically cheap.
If the broad stock market is going to continue higher in 2020, then it’s going to be fueled by a “catch-up” rally in the value stocks. Traders should be looking for the undervalued
and underappreciated names of 2019 to lead the market higher this year.
Best regards and good trading,
P.S. If you ask my friend and colleague Teeka Tiwari, there’s another sector that should do very well in 2020…
But, it’s not in the stock market.
Teeka says that by acting on this idea, you could potentially pay for your whole retirement after one specific day this year.
If you’re interested, just click right here and get the story straight from Teeka. But don’t wait too long… This opportunity closes for good before the end of January.
Today a new subscriber thanks Jeff for his frequent communication…
Jeff, though I’m fairly new to your services and have hardly placed any trades – the amount of communication you have is awesome. The transparency of your thoughts, daily, about where you see potential trades going is bold.
No one gets everything right all the time, but you actually put yourself out there consistently. I think it’ll make me a better trader by just reading your thoughts you share consistently.
And another subscriber shares his recent gains using Jeff’s Breakout Alert strategy…
Thank you for one of your most recent Breakout Alert trade recommendations… I was able to close it with over 70% gains!
On top of another recent trade that brought me 30% gains, this makes the Breakout Alert my favorite subscription, next to Delta Direct and Delta Report. I stopped using all my other subscriptions.
I like the way you explain the trades, how you follow up with the trades, and your approach to the trades.
The Jeff Clark Mobile app is practical, and I use it every day. I look forward to reading your report every morning as well as updates throughout the day.
And one more reports on their experience using the new Jeff Clark Mobile app…
Jeff, this latest app is working simply awesome for me. I used to use the text alerts for notifications then log on and look what was just posted.
This latest revision of your app requires only my fingerprint without having to fumble passwords. PLUS, it gives the latest of each subscription, so at first glance I only get what I haven’t seen.
I’m so excited because I get a better jump on your recommended trade at each post. If I want to look at something that’s aging in a portfolio, I can always use the web browser for that.
Thanks, Jeff, for your relentless improvements!
If you haven’t already, make sure to download the Jeff Clark Trader mobile app (here for iPhone and here for Android). And if you like what you see… or even think it could use some work… consider leaving a review on either app store.
As always, thank you for your thoughtful emails. We look forward to reading them every day. Keep them coming to [email protected].