Find “Hot Hand” Stocks to Beat the Market

The way to consistent returns requires a different approach. Published By Money & Markets, LLC. March 06, 2024 Published By Money & Markets, LLC. March 06, 2024 [Turn Your Images On] [Turn Your Images On] From The Desk of [Michael Carr]( Editor, [Money & Markets Daily]( Find “Hot Hand” Stocks to Beat the Market Money & Markets Daily, If you’ve ever watched basketball, you know that some players have a hot hand — a period when they make all of their shots. We’ve all seen players with hot hands, from pick-up games among school kids to competition between the best players in the NBA. We tend to believe that a player is more likely to make another shot if the previous attempts were successful. For decades, academic researchers told us we were wrong. In 1985, experts behind The Hot Hand in Basketball: On the Misperception of Random Sequences [study]( used math to show that there was no such thing as a hot hand. Other researchers used the same approach to confirm this claim. Yet, fans continued to watch players dominate games by going on seemingly endless scoring streaks. And they weren't convinced… The Mystery and Science of a Winning Streak In 2019, researchers from Australia and France took another look at the data because something wasn't adding up. In A Cold Shower for the Hot Hand Fallacy: Robust Evidence that Belief in the Hot Hand is Justified, [they proved]( that the fans were right. Players do have a hot hand in some games. Back in 1985, researchers loaded data onto punch cards. These were run through a computer to solve problems. So, in 2019, these researchers tracked down those cards and digitized the data. They found flaws in the methodology. All the papers replicating the initial research used the same flawed approach. The hot hand phenomenon also shows up in stocks and the investing world. Finance professors fell into the same pattern for many years. [Nobel Prize winners]( used complex math to show that no one could beat the market. Then, a [paper published in 1967]( showed this was wrong … you could beat the market using momentum. After that paper was published, researchers went to work to disprove it. They couldn’t. Some great minds in the academic community concluded that there must be a bug in the programming. They couldn’t find it, but they were sure it was there. Others assumed the results were a [Type I statistical error](. This allowed them to accept the results while still claiming they were invalid. --------------------------------------------------------------- [Turn Your Images On]( From our Partners at Banyan Hill Publishing. [Crypto’s Next Bull Market]( Cryptocurrency expert Ian King has identified the next crypto coin set to go through the roof. In just one year, his December 2020 recommendations gave investors returns of up 1,061%, 1,934% or even as high 18,325%. Don't miss out - follow Ian's latest advice for [full details on how you can get involved today while prices are still low.]( --------------------------------------------------------------- Play the Market With a Hot Hand In 1993, researchers showed that you could consistently beat the market. All you needed to do was buy stocks that were going up and sell stocks that were going down. Momentum shows us that stocks already on their way up are more likely to continue moving higher in the near future. This is all obvious to us now. But for decades, researchers and investors refused to believe it. Even today, some investors prefer to ignore the data. They look for stocks that are beaten down, proclaiming they have an extraordinary power that allows them to ignore the market data. They’re like the researchers who showed there was no hot hand in basketball. They ignore what they see and act on what they believe. That’s a risky approach to investing. My colleague Adam O’Dell works hard to avoid unnecessary risk. He simply follows the data and looks at momentum — that controversial strategy uncovered in 1967 that proved to traders it’s possible to crush the market. After analyzing thousands of stocks and a backtest over 24 years of data, he’s designed his own disciplined approach, using a trading strategy he calls “Infinite Momentum.” Here, he only looks for stocks that are going up and show clear signs that they will continue to go up for a minimum of 30 days. Then, every four weeks, he reassesses the portfolio's momentum, sells the stocks that are losing steam, and replaces them with new stocks based on his system's criteria. It’s a strategy that has proven to work really well. Results show that the [Infinite Momentum system]( would have beat the market 300 to 1 over the last 24 years, and that's based on a simple strategy that rebalances the portfolio once every four weeks. Now [is the perfect time to join]( his premium service because he's getting ready to rotate the portfolio again on Friday, March 8. [Click here to get started.]( Until next time, [Michael Carr]( Editor, [Money & Markets Daily]( --------------------------------------------------------------- [Turn Your Images On] Toys R Us Shows What Can Happen to NVIDIA Nvidia Corp. (Nasdaq: NVDA) gained more than 200% in the past year. Gains like that are unusual but not unprecedented. Since 1980, we have seen 296 stocks in the S&P 500 Index enjoy price moves like that. Those stocks were higher 57.5% of the time three months later. A year after the big rally, 54% of the stocks had added to their gains. Toys R Us (TOY), a one-time stock market darling, shows a typical pattern. After rallying more than 200% in 1983, TOY suffered a 30% pullback. But the stock was one of the best performers over the next 10 years. NVDA could follow a similar pattern with pullbacks along the way to a decade-long bull run. — Mike Carr, Chief Market Technician, Money & Markets TOY Forged a Similar Path to NVDA [Turn Your Images On] [(Click here to view larger image.)]( --------------------------------------------------------------- Check Out More From Money & Markets Daily: - [MOVE OVER BITCOIN…]( - [STRONG BULLISH MOMENTUM IN AN OVERLOOKED OIL SECTOR]( - [YOUR POWER RATINGS GUIDE TO EARNINGS AS STOCKS POP (AND DROP)]( --------------------------------------------------------------- [Turn Your Images On]( Privacy Policy The Money & Markets, P.O. Box 8378, Delray Beach, FL 33482. To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. 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To ensure that you receive future issues of Money & Markets, please add info@mb.moneyandmarkets.com to your address book or [whitelist]( within your spam settings. For customer service questions or issues, please contact us for assistance. The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: [( Legal Notice: This work is based on what we've learned as financial journalists. It may contain errors and you should not base investment decisions solely on what you read here. It's your money and your responsibility. Nothing herein should be considered personalized investment advice. Although our employees may answer general customer service questions, they are not licensed to address your particular investment situation. Our track record is based on hypothetical results and may not reflect the same results as actual trades. Likewise, past performance is no guarantee of future returns. Certain investments carry large potential rewards but also large potential risk. Don't trade in these markets with money you can't afford to lose. Money & Markets permits editors of a publication to recommend a security to subscribers that they own themselves. However, in no circumstance may an editor sell a security before our subscribers have a fair opportunity to exit. Any exit after a buy recommendation is made and prior to issuing a sell notification is forbidden. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. (c) 2024 Money & Markets, LLC. All Rights Reserved. Protected by copyright laws of the United States and treaties. This Newsletter may only be used pursuant to the subscription agreement. 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