Editor's note: Today, we're doing something a little different. We're sharing a piece from our corporate affiliates at Chaikin Analytics. The Chaikin team uses a quantitative strategy to pick stocks. And as you'll see today, it's a great tool for finding the best companies...
In 1969, Dr. Richard Jarecki made a $100,000 bet on a single spin of a roulette wheel...
It was equivalent to roughly $766,000 today. That's a lot of money for a single spin!
But the 38-year-old medical professor knew the odds were in his favor. In fact, he had beaten the roulette wheel with an ingenious "hack" countless times before...
From 1964 to 1969, Jarecki used it to win around $1.25 million. (That would be about $9.6 million in 2022.) In interviews, he pretended to have a powerful computer system that helped him crack the code.
In reality, all Jarecki did was collect the right data... and use it to his advantage. Essentially, he figured out which roulette wheels had a bias to land on certain numbers more often.
To learn how each wheel would behave, he and his team would watch as many as 10,000 spins in a month. He could even remember specific wheels by their characteristic nicks and dents... so the casino couldn't fool him by changing it up.
It's one of the better tales of "beating the house." But the beat-the-house mentality isn't just for the casino...
You need to stack the odds in your favor in life, too. That's especially true in the world of investing.
Today, I'll show you how I use the Power Gauge to do that. After all, it was developed by a Wall Street legend who dedicated his career to tilting the odds in his clients' favor.
Once you see how well it works, you'll want this house-beating hack for yourself...
My colleague Marc Chaikin, inventor of the Power Gauge, started on Wall Street in the mid-1960s. He soon realized how brutal the market could be. And soon after those early days, he dedicated himself to finding market hacks that would help his clients outperform.
The culmination of his life's work is our Power Gauge system. It combines the 20 most important factors used by institutional traders.
The Power Gauge uses a proprietary weighting method to translate these factors into a single, actionable rating for more than 4,000 stocks. It ranges from "very bearish" all the way to "very bullish."
It collects the right data... and turns it into something that's easy to use. More important, the Power Gauge rating is critical in finding stocks that are set to succeed.
Here's how it did last year...
There's a lot going on here. Let me call your attention to a few key points...
First, I've included a benchmark to keep us honest.
It's an equal-weighted version of the Russell 3000 Index. As you can see, this benchmark produced an annualized return of about 7.5% last year (based on rolling returns with a one-quarter holding period).
Next, notice that the "very bullish," "bullish," and "neutral+" stocks all crushed the benchmark. In other words, investors who use the Power Gauge to select stocks from those three categories are set to shine. They're choosing the best stocks in the benchmark.
You don't have to take what the market offers and hope for the best. The Power Gauge is our hack... It stacks the odds in our favor.
But the Power Gauge does more than just direct us to the stocks most likely to outperform. It also helps us steer clear of the worst of the bunch – "bearish" and "very bearish" stocks.
Look at how poorly the stocks in these two categories performed. They actually lost money.
The bottom line is... you need to stack the odds in your favor if you want to outperform. And the Power Gauge is designed to do just that.
It knows how to sift the good from the bad. And it's a hack that every investor needs in their toolbox.
Good investing,
Karina Kovalcik
Editor's note: Marc Chaikin's work is already featured in every Reuters and Bloomberg terminal on the planet. Now, this Wall Street legend is releasing a new prediction about an extraordinary shift coming for U.S. stocks. On March 30, he'll explain how this strange market event is already sending some stocks crashing, while others soar... and why the next 90 days are a critical time for you and your money. Learn how to tune in for free right here.
Further Reading
Professional investors always stack the deck in their favor. If you want to have a fighting chance in the markets, it pays to know what they're doing. And this one tool can help you "look over their shoulders"... Read more here: This Is Like Sitting in on Private Board Meetings.
Marc Chaikin knows the markets as well as anyone. That's why, after the 2008 financial crisis, he developed powerful tools to help everyday investors get a leg up on Wall Street. Check out his two-part essay here and here.
Savvy stock analysis can help you beat the market time and again. And these three simple tools will allow you to analyze the market for yourself...
REACHING NEW HIGHS AS STEEL MAKES A COMEBACK
Today's company is ramping up as things get "less bad" in its industry...
Regular readers know big gains can happen when conditions go from "bad to less bad." That may be especially true of commodity-based businesses. Since they're already cyclical, even a small turnaround can send them soaring. Today, we're looking at a company that's profiting as the U.S. steel industry improves...
Nucor (NUE) is a $40 billion U.S. steel producer. Its steel goes into things like automobiles, airports, bridges, heavy equipment, and more. In 2018, tariffs kept the steel industry hanging on despite decades of decline... until COVID-19 shutdowns brought business to a standstill. Today, though, demand is roaring back... Nucor reported record results for 2021, with consolidated net earnings of $6.83 billion. And now, new fears of shortages from the war in Ukraine are pushing steel prices higher as well.
As you can see, NUE shares are in an uptrend. They're up more than 120% over the past year, including dividends. And they recently hit a fresh all-time high. If demand keeps soaring for this formerly struggling sector, this trend should continue...
