12 stocks to consider for the next leg of the bull market

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You may want to wait until the stock market turns up again before expending energy on trying to pick individual companies.

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That’s because, during bear markets, almost all stocks become correlated with the market. Only once a new bull market starts do correlations fall, and that’s when you have relatively good odds of picking stocks that will beat the market averages.

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To illustrate how correlations vary with the market cycle, consider the bear-market bottom in March 2020, at the end of the waterfall decline that accompanied the initial stages of the Covid-19 pandemic. The S&P 500 Index SPX,
+2.39%
hit its low on March 23 of that year, and most individual stocks did as well. In fact, based on my analysis of FactSet data, the median stock in the S&P 1500 Index — consisting of large-, mid- and small-cap stocks — declined to its bear-market low within five days of March 23. That’s a narrow range.

A broader range existed at the bull-market top earlier this year. Though the S&P 500 rose to a record closing high Jan. 3, Many individual stocks did the same long before or after. In fact, the median stock in the S&P 1500 topped out 55 days away from Jan. 3 — as early as Nov. 9, 2021 or as late as Feb. 27 of this year. This range is more than 10 times wider than at the March 2020 bottom.

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We don’t know when a new bull market will begin, needless to say. As this is written, the S&P 500 is 18.1% below its early-January high, just shy of the 20% loss threshold that’s usually considered a bear market. The market could very well continue to decline, perhaps significantly, and so long as the trend is down, it’s a good bet that the stocks you pick will march to the beat of a similar drummer.

But it’s not too early to start building your buy list, in anticipation of when the major trend does turn back up. To assist you in that process, I constructed the following table of stocks that are uncorrelated with the overall stock market.

To do so, I started with a list of stocks that are currently recommended for purchase by at least two of the top-performing newsletters monitored by my performance-auditing firm. I then sorted them according to their betas — a statistical measurement of the degree to which a stock historically has moved up or down with the market as a whole.

The table below contains the dozen such stocks with the lowest betas; they are listed in ascending order of their betas.

Stock

Beta

# newsletters currently recommending for purchase

ZimVie Inc. ZIMV,
+2.03%

0.11

2

Clorox Co. CLX,
+0.80%

0.26

2

General Mills Inc. GIS,
+1.23%

0.37

2

Moderna Inc. mRNA,
+5.95%

0.41

2

Verizon Communications Inc. VZ,
+0.25%

0.46

2

Procter & Gamble Co. PG,
+1.07%

0.59

2

Merck & Co. Inc. MRK,
-0.46%

0.60

3

Altria Group Inc. MO,
+1.67%

0.60

2

Bristol Myers Squibb Co. BMY,
-0.66%

0.60

2

Johnson & Johnson JNJ,
-0.57%

0.61

2

Pfizer Inc. PFE,
-0.93%

0.62

3

PetMed Express Inc. PETS,
+0.05%

0.63

2

Mark Hulbert is a regular contributor to MarketWatch. His Hulbert Ratings tracks investment newsletters that pay a flat fee to be audited. He can be reached at [email protected],

,

Credit: www.marketwatch.com /

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