How the “Iron Law” of the Stock Market Led to This Earnings Profit Party Dear Reader, My “origin story” is a bit different from most folks on Wall Street. I didn’t cut my teeth at Goldman Sachs or J.P. Morgan. I wasn’t the protégé of a big-name money manager.
The reality is I didn’t come from money. I was raised in a modest household. In fact, my father was a bricklayer. I was the first in my family to go to college.
Here’s the story…
When I was in college at Cal State Hayward, one of my professors gave me an assignment to create a model portfolio that would mimic the performance of the benchmark S&P 500 index.
It was a dream assignment for a numbers guy like me… but I failed at it spectacularly.
The problem? My model kept beating the S&P 500.
This was back in the late 1970s when everyone believed it was virtually impossible to beat the market without taking on excessive risk. Conventional wisdom was that you might get lucky for a while, but no one could consistently beat the market.
Thankfully, my professors gave me unprecedented access to Wells Fargo’s expensive and powerful mainframe computers to continue to build my stock selection models. (Remember, this was more than 40 years ago, before laptops and widespread PCs.)
Through hundreds of hours of research, I discovered how an elite type of stock consistently outperformed the broad market, year in and year out.
Through extensive analysis, I isolated the eight key qualities that these super-performing stocks shared… and I developed a system for tracking them.
The research I did back then serves as the foundation of what is now an advanced, high-tech method of computerized market analysis.
That’s my origin story. I love telling it. I also love hearing other investment analysts’ origin stories. And Landon Swan’s and Andy Swan’s, the founders of LikeFolio and the brains behind Derby City Insights, investing backstory and unique investing approach is a good one.
These brothers made an exciting discovery while working at TD Ameritrade. They uncovered an alternative yet incredibly powerful data source – social media – that, when aggregated in just the right way, could forecast company sales… and predict the market’s next big winners.
While I leverage fundamentals and institutional buying pressure with my proprietary stock-picking system, Landon and Andy leverage “alt-data” and social buying pressure.
What I find particularly interesting is that our stories have a common thread: The “iron law” of the stock market. Earnings and the "Iron Law" On any given business day, millions of people pay attention to the blinking lights and flashing numbers they believe make up “the stock market.”
Unfortunately, just a tiny percentage of those people will ever understand the real secret to making money in stocks.
These folks forget that a stock isn’t just a flashing light on a screen or a trading hot potato. When you buy a stock, you buy a partial ownership stake in a real business.
You own a slice of that company’s equipment, inventory, patents, real estate, and brands. You become financially exposed to both the company’s upside and downside.
The major drivers of a stock’s prices are earnings (or the anticipation of them). The more a company grows its earnings, the more its shares will be worth.
Stock price trends can diverge from earnings trends for a while, but over the long-term, if a company grows and grows the amount of cash it takes in, its share price is sure to head higher.
That’s how the market works. It’s the “iron law” of the stock market.
And that’s why if you’re looking for stocks with massive upside potential, you should focus on the companies with massive revenue and earnings growth.
Andy and Landon use consumer insights to spot which companies are gaining (or losing) momentum on Wall Street. That’s the “iron law” of the stock market.
Understanding that the major drivers of a stock’s prices are earnings (or the anticipation of them) and developing advanced algorithms that can help us spot the opportunities earnings create is our shared secret to unlocking profits in the market.
So, it’s no surprise that, during a recent conversation, the Swan brothers and I discovered that we share some big winners, too… Winning Synergy, Put to Work My computer programs are constantly scanning the market for companies with outstanding quarterly earnings growth… outstanding annual earnings growth… and a tendency to surprise Wall Street analysts with better-than-expected earnings growth.
In addition to qualities related to superior earnings growth, my system screens for companies with increasing operating margins, increasing sales growth, high returns on equity, and strong cash flow.
Andy and Landon have their own system – LikeFolio – that turns hundreds of millions of social data points into proprietary demand and sentiment metrics to tell them when a stock could be ready to lift off.
So, it didn’t take long for us to realize just how many winners we had in common.
Now, I can’t give away everything from our conversation because, in truth, it was much more than a casual chat.
My computer programs are constantly scanning the market for companies with outstanding quarterly earnings growth… outstanding annual earnings growth… and a tendency to surprise Wall Street analysts with better-than-expected earnings growth.
In addition to qualities related to superior earnings growth, my system screens for companies with increasing operating margins, increasing sales growth, high returns on equity, and strong cash flow.
Andy and Landon have their own system – LikeFolio – that turns hundreds of millions of social data points into proprietary demand and sentiment metrics to tell them when a stock could be ready to lift off.
So, it didn’t take long for us to realize just how many winners we had in common.
Now, I can’t give away everything from our conversation because, in truth, it was much more than a casual chat.
See, Andy and I are putting our winning synergy to work for a special event that goes live a week from today: The A.I. Earnings Predictor Summit, January 9, 2024, at 8 p.m. Eastern time. We’re continuing and expanding on our conversation there.
It’s free to attend, so click here to reserve your spot now.
Earnings season is just around the corner – the 10-week profit bonanza when publicly traded companies report their quarterly (and full-year) numbers, and stocks make some of the biggest moves we’ll see all year.
Join us on January 9 to listen in on our conversation… and to find out how YOU can take full advantage.
RSVP here now to secure your spot. |
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