If you feel like you’re on a roller coaster as an investor this month, you’re not alone. Our 3-Stock Trading Strategy is having one wacky month – and yet, our analysis for March turned out to be accurate. With less than two weeks remaining for our monthly trading strategy, let’s check in on the Good, the Bad and the Ugly.
First: our analysis heading into March was a rotation away from Technology. We’re seeing that prove correct so far as much of the Mag7, minus Nvidia, are flat or under pressure. This analysis led us to lower-priced S&P 500 stocks, which are nearly matching the overall S&P 500 performance for the month at 1.34% vs 1.5%.
Price momentum, however, has been broken across a wide swath of stocks this month, including our 3-Stock positions, but for differing reasons.
Let’s Check In on Performance:
The Ugly: I call this the bad luck category – things you can’t prevent. Like GE Healthcare (GEHC), one of our holdings for the month deciding this was a good time to drop an additional 14 million shares on the market, thereby diluting the stock for current holders.
The inevitable result? A quick sell-off in the stock on March 13, which was followed by a buying trend. So the bad luck has turned into no luck in this position as a gain turned into a loss which returned to breakeven, with 12 days to go until the end of the month.
Our 3-Stock Portfolio holds 38 shares, original cost of $90.79, or one penny above the close on Tuesday, March 19. So no gain yet on GEHC, however, there’s a lot to like about this company even beyond the month of March: a low forward PE Ratio (19), +12% forward earnings expectations and projected price growth to $100-$113 per share in the current year.
We still have time for this stock to end with a positive gain; on the chart, GEHC needs to cover the March 13 gap down move (about $0.70 higher will cover that gap) and still has potential to end the month at the highs.
Our second stock, Howmet Aerospace (HWM), took one on the chin during a brief sell-off (two days) as the S&P 500 pulled back on March 8 and 11 from record highs.
Overall, the stock is holding just above entry ($66.64), for a gain over just .6%, and an end-of-month rally cannot be ruled out, especially if the Fed provides a favorable outlook for interest rates in the year ahead.
Our final stock in the March portfolio is Builders FirstSource (BLDR), which was our top performer in the early part of the month, until that March 8/11 pullback. We are holding a 2.2% gain for the month, so it isn’t all bad news.
BLDR has channeled sideways, riding its 8- and 16-day moving averages, and looks to be building a bullish wedge as the lower range of price action has not violated the long-term (5-month) uptrend line.
I’m looking for a breakout above $205 before the end of the month, especially if that first rate cut is signaled from the Fed.
After a phenomenal return of 17.5% in February, and 14.9% in January, March is the letdown month. But months like these happen, and our analysis, at a minimum, has kept us out of losing stocks to date.
3-Stock Portfolio
Each stock position: 38 shares
Total Invested (March): $13,408
Total Value (3/19): $13,585
Return: 1.34%
Return Year-to-Date: 36.1%
We’ll be closing our 3-Stock Portfolio on March 29 and entering a new portfolio on Monday, April 1, 2024 (and that’s no April Fool’s Joke!).
The takeaway for readers: don’t be afraid to look at unusual stock names for potential gains; and don’t give up just because you hit some bad luck. It evens out – at some point – I promise. Note that all three stocks had consistent price momentum heading into March, yet for different reasons, that momentum stalled.
It may be up to the Fed to restore momentum to the market in April.
We’ll have another update for you following the Federal Reserve’s meeting this week. Stay tuned for more ideas, research, analysis, results and more in Filthy Rich…Dirt Poor.
