by Jason Bodner

July 13, 2021

Extreme statistics fascinate me – things that seem to beat the odds – and I just found out that I am one.

Did you know that with roughly 500 billionaires in the USA, your odds of becoming one are one in 578,508. Unlikely as that may seem, you have a much lower chance (1 in 3,748,067) of getting attacked by a shark. But meeting Jaws is more likely to happen than winning the Powerball: 1 in 292,000,000.

It’s ironic then that we chalk becoming a billionaire to the stuff of daydreams, not even worthy of pursuit. But at the beach, our fear will assign a real likelihood to a shark bite that’s almost sure not to happen.

Hitting the jackpot, having an unhappy shark encounter, or becoming a billionaire would make you an outlier, which is defined as a person or thing differing from all other members of a particular group or set.

Apparently, I’m an outlier too: I just discovered I have COVID despite being fully vaccinated. Odds are slim – about one in 1,000. The CDC says 99.9% of vaccinated people don’t get infections like mine.

Mom always said I was special.

Don’t worry; I’m fine, other than I can’t smell anything (I hope that comes back). The worst part is that it upended a planned family vacation for next week.

Oh well…

If you’ve read my thoughts here before, you know I focus on outlier stocks. That’s because I discovered that they constantly exist in the market. I’m even more convinced of that now, with my recent setback.

It turns out that outlier stocks aren’t as elusive as our Powerball winning billionaire shark. With a well-defined process, we can predictably isolate them. One approach that has worked well for me and this publication is searching for companies with growing sales, earnings, and profits in unique businesses. Based on those criteria, and using my ranking method, odds are good that 1 in 85 stocks will be an outlier as 74 out of 6,349 stocks made it through that screen. I take it a step further to find when Big Money is buying those stocks. Then odds drop to 1 in 325, which is still better than being drafted into the NBA – about 1 in 3,330 high school basketball players will win that honor.

Like so much in life, the trick isn’t the process: it’s the discipline required to stick with a winning process. That’s always the hard part: sticking with it when it’s not going smoothly. That’s when questions and doubts pop up, which can cause abandonment at the worst possible moment.

Looking back at stocks starting from January we see such a pattern. Growth stocks were cruising along. After the October market jitters before the November election, things settled in nicely for December. Buyers came in and lifted stocks well into February. We can see that here in the Big Money Index: Big Money Index

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

That big lift was dominated by growth companies. And not just new ones either: old stalwart growth companies which dominated for many years were powering higher.

The BMI then stalled in February. The BMI bottom gave out in March and only started to revive in April. Don’t forget the BMI measures all Big Money buying and selling over a 25-day moving average. What this chart doesn’t show is that growth stocks were getting pounded while value stocks (many based on the coming “re-open”) were getting gobbled up.

Jason Bodners Text - with Bullets

Needless to say, we know for a fact many people did exactly that. I for one, can tell you that this “rotation twister” was an uncomfortable period for growth stock investors. My growth stocks were going down. And the ones I thought should be going down were going up. It wasn’t fun.

But patience and process prevailed. Suddenly, in mid-May, the investment winds shifted. Growth was suddenly getting bought up at an amazing clip. Value was getting sold. Had I dumped growth in the turmoil, it would have proven costly and painful.

It can feel bad sticking with something that isn’t going well, but it’s necessary discipline sometimes. Any parent will tell a child they can’t go swimming in a thunderstorm: Wait for it to pass before going outside.

When storms hit stocks, this kind of parental patience is a great asset.

Last week was a holiday-shortened four-day week, and we eventually saw indexes grind higher. But the BMI dropped as we saw some selling. Growth stocks took a pause and some rotational action seemed to be getting underway again.

But pause to remember – it’s July: Wall Street traders are buttoning up risk before going on vacation, so liquidity sometimes dries up. Also, it was the last week before second-quarter earnings start up this week. I held my growth stocks when they were down, and when they got bumped and nudged by a hungry shark, because I know they will have stellar sales and earnings growth. I’m not throwing them overboard when the market gets a little choppy. Summer volatility is normal. July and August are notoriously bumpy months. But September through December is historically strong, as we see in the following table: Big Money Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Outliers happen. I know because I am one; I got vaccinated and still got COVID. When I find outlier stocks, I stick with them because I know the odds are in my favor, long-term. I have way better odds at finding outlier stocks every day than getting a shark bite or a Powerball jackpot. The surest way to lose that game is to be impatient. Janette Ock said, “Impatience can cause wise people to do foolish things.”

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
What Do Bonds Know That Stocks Don’t?

Sector Spotlight by Jason Bodner
I Beat the Odds – in a Most Unwelcome Manner

View Full Archive
Read Past Issues Here

About The Author

Jason Bodner
MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

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