For today's essay, it would be wise to remember the old
"The trend is your friend."
As most investors already know, investing in trends is one of
surest ways to success in the stock market. But while the phrase
itself is simple enough to understand, we often find that most
investors don't know which trends to follow... or even worse,
invest in the wrong ones.
Specifically, we generally find that investors want to focus
... things like interest rates and global debt/GDP ratios. Some
investors go so far as to follow the cover model for the current
year's issue of the Sports Illustrated Swimsuit Edition,
believing that when the model comes from the U.S., the S&P
500 is likely to outperform.
Not to berate the homemade economists of the day, but these
investors are most likely wasting their time.
The truth is,
economic trends can (and should) be mostly ignored by
Even economists -- people who have dedicated their entire
lives to following macroeconomics -- can't accurately predict
when a major economic event has (or will) occur. It took the
National Bureau of Economic Research (NBER) 15 months to announce
that the recession ended in 2009 was officially over.
But if not the economy, then what trends should investors
StreetAuthority analyst Michael J. Carr answers that question
in his latest issue of Maximum Profit. As Michael recently told
As investors, it is more important to focus on trends within
the stock market rather than trying to beat the experts to a
recession call. As the strength of the economy changes,
investors move between different sectors in the stock market.
Spotting these trends can be more valuable than beating the
NBER to announce when a recession starts.
As the economic cycle progresses, investors become more and
less aggressive. This behavior leads to sector rotation in the
As one of the largest investment research companies in the
country, our experts here at StreetAuthority have made careers
out of assessing these kinds of trends. From commodities
to our resident high-yield expert
-- there isn't a corner of the investing universe that doesn't
get covered by at least one of our talented analysts.
Michael J. Carr has now taken that research one step
A few months ago Michael developed an investing system
designed to individually analyze each of the trends that the
StreetAuthority analysts are covering. Using this proprietary
system, Michael weeds through all the analysts' recommendations
-- across all their premium newsletters -- and selects the stocks
he thinks have the most potential to outperform the market in the
The results thus far have been promising...
On August 16, Michael's system identified a "buy" on
Hexcel Corp. (NYSE:
, a $4 billion industrial manufacturing company with a focus on
lightweight materials used to build airplanes and wind
originally identified Hexcel in her August issue of Stock of the
Month. At the time, Amy thought growing orders for airplanes
would spur demand for the company's lightweight transportation
Turns out she was right.
On October 22, Hexcel announced third-quarter earnings of
$0.48 a share, up 23% from the year-ago quarter. Much of the
company's growth in sales was attributable to increased demand
from orders related to Boeing and Airbus planes.
Within that same announcement, the company also reported
year-to-date operating cash flow of $196 million -- a 30%
increase over this time last year.
Hexcel's strong cash flow and steady sales growth has made the
company's stock a consistent performer over the last few years.
As Michael noted in his issue of Maximum Profit:
[ Hexcel] has been moving steadily higher this year. Over
the past five years, HXL has gained about 75% while
S&P 500 (NYSE:
has delivered a gain of 46% on a total return basis. Since
bottoming in 2009, HXL has outperformed SPY by an even wider
margin with a gain of 700% compared to about 150% in SPY.
The recent performance had boosted the stock's relative
strength -- a technical indicator Michael uses to measure how a
stock is performing against the rest of its market -- to 71.2. If
you're familiar with Michael's system, then you know he won't
recommend a stock unless it has a relative strength over 70
(which means its outperforming more than 70% of stocks in the
As a believer in Amy's original analysis, the stock's high
relative strength and growing cash flows prompted Michael to
recommend the company in his August 16 issue of Maximum
Since his recommendation, the stock has surged over 20% in
less than three months.
That's the goal of each Maximum Profit recommendation -- to
identify stocks currently recommended by StreetAuthority analysts
most likely to make big moves to the upside, fast.
So far, so good...
While Hexcel's 20% gain is impressive, it's still not the
best-performing stock this system has identified thus far.
This month, Michael's
system identified another company poised for big gains on top of
its impressive 5.4% dividend yield. While its already gained 40%
so far this year, Mike's system says this stock is still trading
at a discount with room to run. To learn more about Michael's
system and how to get access to the latest issue that features
this stock now,
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