EarningsBeats.com Digest for April 8, 2022
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Leaders Aren't Always in Leading Industries
When I discuss portfolio strategy, one topic that almost always comes up is relative strength. I want relative strength. And the reason is simple. If Wall Street, whose research teams meet up with management teams, is weighting certain industries or specific stocks within industries, we should take note of that too. The easiest way
to do that is by simply comparing a company's stock price vs. others in its peer group and vs. the benchmark S&P 500. While most leaders surface within hot industry groups, there are outliers that flourish in groups that underperform. As an example, let's look at Dollar General (DG):
Over the past two sessions, we've seen DG break out to a 52-week high in a market that's been simply consolidating. That's a very good first sign. Volume has been expanding, momentum is strong, and accumulation appears to be underway. But the relative strength is what I want you to focus on. In the panels beneath the price chart, you'll see that the specialty retail group ($DJUSRS) is trending lower on BOTH an absolute and relative basis.
But look at the relative strength panels of DG. DG is rapidly trending higher vs. its peers and the benchmark S&P 500. There is no debate here. DG is a very strong relative performer, despite being in a weak specialty retail group. What might happen if money begins rotating into retailers?
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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