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Greetings, Finance Trends readers!
We begin our second newsletter with an overview of the leading stocks and market performers of 2016. As we head into the second half of the year, let's examine what has worked, and what's suffered, year-to-date.
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We'll uncover some areas of strength and some opportunities to profit in the weeks and months ahead. As you may well know, it has not been a very easy year for market participants. Even experienced traders (at least those I speak to, or whose updates I read/track) have struggled in 2016.
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It's not just individual investors and traders who are having a rough year. Hedge Fund Research (HFR) performance stats show the average hedge fund has been slumping, as the HFRX Global Hedge Fund Index chalked up a -1.8% return YTD. It gets worse, as the HFRX Equity Hedge Index has returned -5% YTD. So, as you can see, it's not just the "little guy" taking hits in this environment.
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"There is a time to go long. There is a time to go short. And there is a time to go fishing." - Jesse Livermore
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Now let's get to what worked in 2016. If you recall my blog posts from January, I wrote that the outstanding groups in the new year were defensive stocks (including various dividend payers and utilities) and gold mining shares.
Amazingly, these two groups have continued to lead the market in terms of outperformance. Let's follow up with some of the big winners in these sectors.
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Cigarette stocks Reynolds (RAI) and Altria (MO) are up 16% and 19% respectively, YTD. They both pay 3% dividends at a time when most of us are lucky to be getting 1% in our CDs and money market funds. Both were highlighted on the blog (see above posts) and on Twitter back in January.
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Utilities are another winning group in the stock market this year. Some of the strongest stocks in this group are: Xcel Energy (XEL) up 24% YTD, Con Edison (ED) up 25% YTD, American Electric Power (AEP) up 20% YTD, and CMS Energy (CMS) up 26% YTD.
As with the cigarette makers, most of these utilities sport a dividend yield of 2-4% at present. These names were also highlighted at the start of the year.
Note: Some of the water utilities, like Connecticut Water (CTWS), up 45% YTD, and California Water (CWT), up 46% YTD, have done even better. It's been a remarkable first half of the year for the usually stodgy utility group.
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Now let's move away from the defensive plays, and instead, look at a group that is shifting into a dynamic new uptrend. Gold and silver mining shares have been among the year's top performers. I highlighted several of these mining stocks back in January. Let's see how they, and a few others, have fared since.
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Here's a quick roundup of the gold stock leaders in 2016:
Barrick Gold (ABX) +182% YTD
Harmony Gold (HMY) +287% YTD
DRD Gold (DRD) 284% YTD
Richmont Gold (RIC) 189% YTD
Kinross Gold (KGC) 176% YTD
And so on...
Some of the smaller names such as Tower Hill Mines (THM) and Vista (VGZ) have gone up even more. The question is, will the new uptrends in gold and gold mining shares continue into the 2nd half of the year and beyond?
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More importantly, will we be able to enter these stocks and hold on through the next uptrend, even as they try to shake us out?
As I mentioned on Twitter last week, I've learned that it is definitely easier to comment on these trends than it is to trade them successfully. While I've been able to book some smaller profits in gold stocks, I really missed out on some larger percentage gains due to poor entries/exits (timing), poor (at times) stock selection, and stubborn hesitation in buying future winners back in January.
I hope some of you have really profited off this trend and traded it better than I did. Of course, with mistakes come opportunities for learning and improvement. Here's to capturing more of these trends and to better trading ahead!
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That'll do it for this letter, gang. Keep it tuned to Twitter and this space for more market updates in July. Until then, enjoy the summer and have a great Fourth of July holiday!
Best regards,
David Shvartsman
Editor, Finance Trends
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