Hello fellow investors! My name is Kevin Cook and I just joined
the Zacks.com team as a Senior Stock Strategist. I can't wait to
share with you all the ways we can work together to not simply
survive in this market, but to thrive in it!
But, first things first...I want you to know a few
things about my background and lessons learned over the years that
prepared me to become a huge fan of the Zacks Rank stock rating
system and related trading methods. Then we'll top it off with my
current view of the market along with some strategies and picks to
outperform. Let’s go.
FX Training Ground to Equities
Laboratory
I was an institutional currency trader for over
nine years, trading $100 million per day in the hyper-kinetic world
of spot-futures arbitrage. As a dedicated electronic market-maker
providing continuous liquidity to the biggest banks and hedge funds
in the world, I was part of the groundbreaking team at CME
Group (CME) that turned FX Futures into the fastest
growing segment of the $4 trillion-a-day forex market.
This "constant combat" role amidst the titans of
the FX interbank market taught me a lot about risk management,
position sizing, global economics and technical trading tactics.
This was high-frequency trading before the computers took over --
one man or woman, with firepower and capital at the fingertips,
using fast reflexes to buy yen or sterling or marks at one price in
London or Toronto and sell them higher (or at a scratch, if we were
lucky) in New York or Frankfurt.
But soon enough, we realized that a computer could
do the arbitrage of 100 traders on keyboards. And I got the chance
to help build, test and operate the first automated FX arbitrage
algorithms early in the last decade. Essentially, I helped innovate
myself out of a job, but it was time to move on anyway and I found
one of the coolest opportunities in markets.
I went to PEAK6, the powerhouse equity options
trading house in Chicago, and helped build an online options
education community for their broker OptionsHouse.
I spent two years refining my options knowledge
around some of the best pros in the business and became a market
analyst representing PEAK6 on CNBC, Bloomberg and FOX Business,
providing commentary on equities, commodities, currencies and
options strategies.
I knew I had an extraordinary opportunity to advise
investors at the recession lows of 2009 to buy long-term positions
in cyclicals, technology and biotech, recommending
Caterpillar (CAT) at $40, "buying all the
dips" in Apple (AAPL), and backing up the truck on
the iShares NASDAQ Biotechnology Index ETF (IBB)
at $65 and "putting it away."
After the PEAK6 media experiment finished up in
2010, I joined TheStreet.com as an options strategist for one of
their newsletters. This was another great experience where I was
able to take my new equity research skills and apply them to making
specific trading recommendations every day for hundreds of
subscribers.
I had some great trades in that eight months, with
triple-digit winners in names like Ford (F),
Suncor (SU), Chesapeake (CHK),
Eaton (ETN), Marathon (MRO),
Veeco Instruments (VECO), Sandisk
(SNDK), Apple and Google (GOOG).
A Powerfully Predictive Indicator
I also had nice success in the past two years with
other stocks that fit my criteria for momentum, growth or value --
combined with institutional sponsorship. But, I also had some
wipeouts.
And I realized the one thing I had desperately been
in search of since I started investing for myself (at least 15
years) was a core method and set of tools for screening the
universe of equities and picking the highest probability winners
based on this ethereal metric I heard equity fund managers call
"earnings momentum."
Because even if I was right about the macro forces
driving a sector, industry, or stock like Freeport
McMoRan (FCX), ETN, or VECO, my big-picture ideas would
fall flat if I got the earnings picture wrong. But I wasn't a
trained equity analyst or finance graduate, so I knew I would never
figure out a reliable and robust method on my own. It seemed I was
doomed to the randomness of my own ADHD-scanning of markets, hoping
to identify the winners amidst the noise.
Then this spring I found what I was looking for and
all the lights went on. The Zacks Ranks stock rating system changed
the game for me because now I had a proven fundamental model to
screen thousands of stocks instantly every day based on the most
reliable fundamental metric: earnings estimate
revisions.
If you are already a Zacks Rank convert, I don’t
need to explain any further. If you aren’t, then I want to direct
you to the Education pages on the site for a breakdown of the
philosophy, its mechanics and practical uses.
I am such a huge fan for this reason: the
rigorously quantitative and objective model is actually
predictive of stock prices because it has such a high
probability of telling you what the big money is going to do weeks
before they do it.
Second-Half Outlook and Ideas to Profit
So where are we now after this terrific bull run
off the recession lows? My amateur-economist take is that we are
still in the middle innings of this recovery which will extend into
2013. Emerging markets are still driving global growth and despite
the extraordinarily accommodative monetary stance of the Fed,
inflation is not of a run-away variety -- yet.
As we enter the summer months, I think the market
will drift sideways to lower as the path of least resistance when
catalysts are fairly balanced. When it's done resting, I believe
we'll see the S&P 500 at the 1,500 level by this time next
year.
Markets have shaken off and priced-in most bad
news, but investors have also erred on the side of pricing in a
good chunk of the good news, too, like record corporate profits and
tons of cash still on the sidelines. Wild cards are housing
weakness which may spur further Fed QE programs, and the US debt
crisis which may start to mirror the European one.
In all cases, we could be in for some good
volatility and selling as investors protect profits during this
seasonally weak time of the year. In a bull market, most
selling-related volatility is "good" and spells buying
opportunities.
My favorite strategy will be to wait for a
fear-driven sell-off, where volatility surges, to sell puts on my
favorite names for the rest of the year. I want to accumulate
positions in energy names like Suncor and Occidental
Petroleum (OXY), materials names like FCX and
Alcoa (AA), and industrials like CAT and ETN. The
opportunity may occur this summer, or it may wait for a classic
autumn meltdown.
In either case, the S&P should find support
above 1,200 and bargains will be found on high-quality stocks with
strong positive earnings outlooks. So keep an eye on the Zacks Rank
for these names, especially as we head into Q2 earnings season.
Other than sovereign debt dramas, the really
interesting fireworks will come after the Fourth of July when
company numbers once again reveal the true nature of the investing
landscape.
Kevin Cook is a Senior Stock Strategist for
Zacks.com
ALCOA INC (AA): Free Stock Analysis Report
APPLE INC (AAPL): Free Stock Analysis Report
CATERPILLAR INC (CAT): Free Stock Analysis Report
CHESAPEAKE ENGY (CHK): Free Stock Analysis Report
CME GROUP INC (CME): Free Stock Analysis Report
EATON CORP (ETN): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
FREEPT MC COP-B (FCX): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis Report
MARATHON OIL CP (MRO): Free Stock Analysis Report
OCCIDENTAL PET (OXY): Free Stock Analysis Report
SANDISK CORP (SNDK): Free Stock Analysis Report
SUNCOR ENERGY (SU): Free Stock Analysis Report
VEECO INSTRS-DE (VECO): Free Stock Analysis Report
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