Fund managers were giving up on growth stocks back in March...
The switch to value was in full swing. But as I noted in DailyWealth last month, joining the rush to value was probably not a good idea. Growth stocks were set to keep outperforming.
Since then, growth stocks are up 7%, while value stocks are up 2%. Importantly, this latest rally can continue... because growth stocks have entered a rare setup along the way.
The iShares Russell 1000 Growth Fund (IWF) rallied nine days in a row earlier this month. And buying after this kind of setup can lead to double-digit gains.
Let me explain...
Seeing a string of consecutive up days might seem irrelevant. But it's not...
Stocks that go up tend to keep going up in the short term. And stocks that are falling often keep falling.
This kind of setup is an extension of that idea. It tells us when an uptrend is starting to "break out" to its next phase. And these setups can signal when a trend is accelerating.
Today, we are seeing that happen in growth stocks. IWF strung together nine up days in a row earlier this month. Take a look...
After falling in March, IWF has bounced back sharply. It's now back in a strong uptrend. And we can see a string of up days on the chart as well.
A nine-day rally in IWF is pretty darn rare. So to get a good data set over the last 20 years, I looked at every time IWF rallied eight-plus days in a row. Since 2000, similar setups have led to solid outperformance. Check it out...
Growth stocks have done well over the past 20 years... returning 7.4% annualized gains. But buying after today's setup can lead to even better results...
Similar instances resulted in 5.4% gains in six months and a 9.8% gain over the next year. Those are the typical gains you can expect with a setup like we're seeing today.
That's not the top of the possible range, either. IWF has rallied as much as 25.7% in a year after this kind of up-day setup. That's an impressive return.
In short, growth stocks have big upside potential over the next year. And shares of IWF are a simple way to make the trade.
Good investing,
Chris Igou
Further Reading
When investors are too bullish on stocks, it's normally a good idea to take the opposite side of the bet. But a recent survey of hedge-fund managers says that we want to own stocks right now... Read more here: Fund Managers Hit Near-Record Levels of Bullishness.
Markets around the world are rallying right now. And one recently stood out. Ignoring this uptrend could be a huge mistake, especially since it's still just getting started... Get the full story here: This Forgotten Market Has More Upside Ahead.
We want to own U.S. stocks today, particularly ones with solid growth potential. And one company is likely to thrive thanks to a long-term growth trend in its sector...
FOLKS KEEP BUYING THEIR FAVORITES FROM THIS BEVERAGE GIANT
Today, we're looking at a company that "sells the basics"...
Regular readers know we love investing in companies that sell everyday products. It's a winning strategy that can lead to steady gains... since folks are always stocking up on consumables like cleaning products and snacks. Today's company is a great example...
Keurig Dr Pepper (KDP) is a $50 billion multinational beverage company. It has more than 125 brands... including well-known names like Dr. Pepper (soft drinks), Snapple (tea and juice), and Krispy Kreme (coffee). This wide range of products and popular brands keeps people coming back for more, through good times and bad. And that has been true even during the COVID-19 pandemic... In 2020, KDP reported sales of $11.6 billion, up 4.5% from 2019.
As you can see, KDP is up 85% from its bottom when investors panicked early last year. And shares just hit a fresh all-time high. As long as people keep buying their favorite beverages, this business will continue to thrive...
