by Jason Bodner

July 14, 2020

What would you do if you were super-rich?

The answer for some is to seek luxury, leisure, yachts, and a carefree existence.

For others, it’s seeking extravagant rarities. I just read that someone slapped down $114,000 for a sealed copy of the 1985 video game Super Mario Brothers at an auction last week.

Super Mario Brothers Video Game Cartridge Image

The game was part of a collection of 1980s and 1990s video games sold to various buyers for nearly $700,000. If that doesn’t outrage you, maybe you’re too rich!

Years ago, I dreamed of wealth like that. I’d get mad with jealousy hearing stories like this.

Now I know I won’t ever be in that position, but I’m not jealous of that buyer, I’m mad at him, because I imagine the great outlier stocks I (or they) could have bought with that money.

At my firm, we just talked about how one of us nabbed our first 10-bagger, a stock that went up 10 times its original value, how $3,800 turned into $38,000 in only six years. I bet Super Mario won’t fetch $1.14 million in six years. But hey, playing Mario at age 14, I never thought it would net $114,000 either.

After years of wondering how to get rich, now I actually know how to do it.

It’s a simple formula: Don’t spend beyond your means, save money, and buy outlier stocks, reinvest the dividends and eventually you may earn quarterly dividends that are multiples of your original purchase.

That’s why when I see money squandered, I get mad! All that wealth creation fuel wasted!

The problem with the above formula is that while stocks historically make a great long-term investment, some stocks crush the indexes. I’m only seeking the biggest winning stocks, the outliers.

But how do you find them?

That’s not so hard. First you look at all the stocks. You then measure the strongest to weakest in order. I only focus on the best ones: They make big money, have huge sales and earnings growth, low debt, and awesome businesses. But when you take the best and leave the rest, you end up with only a handful.

To find the outliers, look at the big money investors and when they buy the best quality stocks.

That narrows 5,500 stocks to only 20 or so. That means I’m a snobbish luxury stock collector. Instead of shopping for luxury yachts, I aspire to collect luxury stocks. I built a whole computerized system to do all that work for me because I’m a little lazy. That work is monotonous, so my system does it for me.

The big part of finding out where the big money flows is to look at how the sectors perform. It’s important because at times the best outlier stocks clump together in certain sectors.

Think of the 1950s. Tech companies back then are like the industrials today. Airline and communications companies were thrusting our country forward in innovation. Today they are boring cash cows. But had you plopped $114k into a handful back then and reinvested dividends, you’d have tens of millions today.

Granted 70 years is a long time, but the point is, big money flowed into the strongest sectors then.

It’s no different today.

We should focus on strong sectors and lean into the big money. Contrarily, we shouldn’t catch falling knives in lagging sectors. That strategy may work for the brave, but I prefer bets with great odds.

I don’t love huge risks with my money, so let’s look at where the big money is flowing to find outliers.

THE BMI IS STILL OVERBOUGHT …. BUT FALLING

The Big Money Index (BMI) has been overbought for nearly two months, which is fast becoming the second longest overbought period in our 30-year history.

MapSignals Big Money Index Chart

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

Let’s look at Big Money buying on a sector-by-sector level. A falling green line is buying slowing.

Big Money Buying Sector by Sector Level Charts

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

Buying is slowing in those sectors, but in looking for the sectors that are the strongest, let’s survey all 11:

MapSignals Sector Rankings Table

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

Generally, money continues to pour into tech and healthcare. These sectors have been the true engines of market growth over at least the last year. Tech continues to make our lives easier and more convenient.

Energy is the spot to avoid. Sellers are starting to show up in Energy stocks. It’s not visible in the table above, but my research firm’s data points to possible future weakness in Energy stocks.

My BMI indicator still says we’re overbought, so I’d avoid plowing into the market at these heights.

Here’s the caveat: there’s no bad time to buy outlier stocks, just better times to find better deals. By constantly deploying money into outlier stocks, you never really need to worry about timing the market. You just grow your wealth steadily over time. When you realize this, you want to start as soon as possible. You’ll want to put every penny you can into the program. Like me, you’ll get mad when you see some chump dropping a hundred grand on a 35-year old plastic game cartridge that won’t ever get played. You’ll think of all the future riches $114k could become, now that you’ve figured out how to get rich.

Benjamin Franklin Quote Image

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
The Fed is Moving in Mysterious Ways

Sector Spotlight by Jason Bodner
The Proven Path to Super Riches

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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