The Year in Review and the Year Ahead - Growth Themes, Strategies and What to Focus On in 2020

Published on January 2, 2020 @ 7:42am

The year in review and the year ahead. Growth themes, strategies, specific sectors to focus on and what we expect for 2020. Potential concerns that could surface along the way. Major averages still hanging in there on a short-term basis - no definitive reversal signal from the NASDAQ Composite yet, but that could change soon.

The Year in Review and the Year Ahead - Growth Themes, Strategies, Specific Sectors to Focus on and What We Expect from 2020    

Before we get into the short-term minutia regarding the major averages, I thought we'd take a few minutes today and have a quick look at the year in review, and more importantly things to focus on in 2020.

It was clearly a great year in many ways with some hiccups along the way, but nothing was better than those individual short to mid-term trading ideas we put out there when the markets bottomed on a number of occasions throughout the year.

Calling those short-term tops and bottoms throughout the year not only gave many of you an opportunity to position yourself in many high quality names and/or non-leveraged ETFs on a long-term basis, it gave those of you with a short-term strategy an opportunity to experience some excellent gains in many of those high quality names over the course of several days to several weeks. However, it was the highly volatile back and forth gyrations throughout the Summer months that did give us fits in a number of trading ideas.

For those of you who have maintained exposure all year to those high quality ETFs we've suggested holding, you've likely done extremely well depending on when and where you entered. QQQ and SPY are up just over 39% and 31% respectively for the year, and I still don't think either of them are worth cutting on a long-term basis yet. As a matter of strong opinion, I'd use any substantial selloffs going forward as an opportunity to participate in those ETFs and trading ideas listed toward the bottom of the newsletter here.

Still, those of you who have gotten to know me well over the years know I'm about as critical of my own analysis as anyone could be of me. Although 100% perfect accuracy is something most of us will never achieve, it's still something I strive for in an effort to help all of you get the most out of these markets year in and year out.

With that, we issued 68 short to mid-term individual company trading ideas this year, of which 45 of those were up by the time we removed them - for a directional accuracy rate of 66% on a short-term basis. However, for those with a bit of a longer-term strategy, of the 23 short to mid-term ideas we posted a loss on, 11 of them are higher right now than where we initially suggested them. Meaning, about 80% of the individual company ideas we put out there this year went up before it was all said and done.

We also suggested a number of longer-term dividend paying stocks that continue to do well. Stocks like MO, BIP and VIAC continue to serve those who have an appetite for high quality dividend paying companies. However, it was a number of individual high quality names like AMD, QCOM, NVDA, DIS and others that have added excellent gains to those long-term ETFs throughout the year.

Where were the disappointing hiccups? Some small cap ideas we put out there earlier in the year, and some of those leveraged ETF trading ideas I didn't quite time right. However, even many of those small cap names we ended up cutting for losses have come back to life, while most of those leveraged ETFs have also come back in a big way.

Nevertheless, most of you here know I'm not a fan of holding leveraged ETFs on a long-term basis, so if we're keeping it real it's been some of those leveraged ETF trades this year that have been the bigger disappointments.

The bottom line is it was a good year, but much of the success should be attributed to two very important things everyone should always keep in mind -  always participate in high quality names or ETFs that have fundamentally proven themselves, and always remember the best opportunities are usually going to surface around key short-term tops and bottoms.

The latter is something I've studied and continue to provide my analysis on every single day these markets are open. Nothing raises and lowers all ships on a short or long-term basis more than the overall tide itself, so it's always important to stay abreast of what's happening with the major averages week in and week out.

So What's in Store for 2020?

First, I do expect these markets to continue higher in 2020 - albeit not without volatility along the way. This should make for some very attractive opportunities on both a short and long-term basis, but the key will be to maintain exposure to those high quality individual names and those highly liquid non-leveraged ETFs that continue to outperform mutual funds and most other basket type instruments out there.

Further, when it comes to those high quality names it's going to be very important investors stay focused on those companies with lower debt levels and attractive balance sheets. It's OK to trade any quality name on a short to mid-term basis, but for those with more of a long-term buy and hold strategy I can't emphasize enough to make sure you're underweight those speculative small caps, stay away from those miserable penny stocks and pick your spots when it comes to short-term trading anything.

Nothing in these markets over the last few years have provided better opportunities than entering into those high quality names and ETFs after the markets have taken a fairly sizable breather. Therefore, it's going to be all about identifying the right sectors at the right time, and then those individual high quality names within those sectors that should continue to prove the biggest returns on a long-term basis.

Also, assess your risk tolerance, because although we will continue to suggest certain leveraged ETFs on a short to mid-term basis, as well as what I find to be attractive small caps on a short and long-term basis, both of these type of ideas never come without a fair amount of risk. Meaning, if you're not prepared to deal with as much as 20% movement in either direction in any idea on a short-term basis it's probably not a good idea to even consider them when we put them out there.

Nevertheless, I will continue to do my best to help everyone successfully self-direct their portfolios in an effort to maximize gains next year and beyond.

So What are the Growth Themes and Potential Concerns 2020?

Within the technology sector, semis, cloud, software as a service and 5G will continue to be the bigger focus. Within the entertainment sector, I'm still a big believer in eSports and electronic gaming, while over-the-top TV will probably continue to run into competitive pressures.

Healthcare, pharma and biotech have finally woken up in recent months, and I don't expect that to slow down significantly anytime soon. However, when it comes to development stage biotech there are going to be far more monstrous losers than there will be winners.

The latter is why we don't often suggest development stage biotech, but if there's one thing everyone should look at before deciding whether or not to participate in any biotech name, it's to be sure to look at the company's cash on hand. It's just as important as the company's technology. Development stage biotech companies with low cash levels are never a good thing, because at the end of the day it's all about whether or not the company in question has enough cash on hand to see its way through the FDA approval process.

Quite honestly, I don't see retail being a big winner, but there's clearly no problem maintaining exposure to the bigger players in online retail next year and beyond. LULU, AMZN, COST, SHOP and TGT are a few names I continue to like for the long haul, but it's probably a good idea to stay away from those brick and mortar type plays that still haven't managed to develop a highly successful online presence.

Energy is one sector I do think can finally outperform the major averages next year. A little over a month ago I pointed everyone's attention to a looming breakdown in the dollar. It took some time, but the long-term reversal signal was confirmed. That should help the 3 E's in 2020 - exports, energy and earnings from those companies that generate revenue from abroad.

Speaking of abroad, I also believe global equity markets will finally continue to perform much better than they have over the last few years. Most all of the global equity markets spent the good part of two years in a recession, and more importantly a very long and volatile consolidation period. However, just a few weeks ago the entire global equity landscape finally broke out to the upside - hence our recently suggested entry into ACWI, one of the best performing all-world ETFs tracking global markets.

Rather than getting too overly excited about financials in 2020, I think it's still those credit card players that can continue to pad outperforming gains in 2020 - specifically Visa (V) and Mastercard (MA), as I'm not a fan of American Express (AXP).

The only two potential concerns outside of some sort of major unexpected geopolitical event is a runaway move to the upside in commodities and the highly unlikely possibility of rising interest rates. I still don't think the Fed is going to let rates go high enough to negatively impact the current equity landscape, but a runaway move in commodities could become a concern.

Still, if the latter starts happening we can most certainly increase exposure to commodities in general in an effort to maximize gains in the event that starts to surface. I already suggested a gold trade a few trading days ago via GLD or UGLD, but if things on the commodity front really start to pick it up we'll likely suggest increasing exposure to metals, energy and agricultural commodities - if and when the time appears right.

Although the election next year is going to come front and center in and around every aspect of the media, I don't think any of it will be more important than earnings, interest rates, monetary policy and commodity prices. Therefore, it's the latter four, along with obviously paying very close attention to the markets' technical activity, that is going to be far more important than anything else.

The bottom line is I'll continue to put my best foot forward toward working to identify when I think these markets are on the verge of topping or bottoming out on a short, mid or long-term basis. Then, identifying those high quality names I think warrant long-term consideration that I also think are on the verge of providing some nice short-term gains. If it's a short to mid-term top we're dealing with, we'll also look to point your attention to market hedging instruments, and those bearish leveraged ETFs that an also provide nice gains in a downward trending market.

I also want to remind everyone if there's any individual ideas you want an objective fundamental and/or technical opinion on, you can always email me directly by replying to any of my daily newsletters. I'm always here to assist, and it's always going to be my goal to provide you with the best most objective and unbiased service out there. I work for you, and nobody else. 

Despite Some Short-Term Weakness the Bullish Bias is Still Intact - For Now

As for the short-term minutia taking place with the major averages right now, the NASDAQ Composite did not close below the 8,941 level yesterday - an event I suggested yesterday would likely trigger more downside ahead. Provided here is an updated daily chart showing you not only did the index hold that level by yesterday's close, the 3X3 DMA (blue curved line) has now moved - specifically to 8,973 now.

Therefore, a close today below 8,973 is likely going to trigger more downside ahead on a near-term basis. Again, not necessarily the type of deep selloff we've seen on a number occasions over the last few years, but at least a little more downside ahead - specifically toward one of the few first retracement levels you see on the daily chart here.

Again, typically when an instrument has been thrusting like all of the major averages have been for three months now it takes quite a bit to crack that type behavior. Meaning, although all of the major averages are clearly due for a breather soon it still doesn't suggest shorting these markets in anticipation of another deep selloff - not yet anyway.

In short, we'll continue to tread lightly around current levels and see how things develop to close out the week. Stay tuned... 2020 is likely to be a very interesting and exciting year for all of us.

I want to wish all of you a VERY Happy NYE, and all the best to you and your families in 2020.

Current Stance for Equities:

Long-Term Bullish - Short-Term Neutral

Suggested Long-Term ETF Holdings:

Invesco QQQ Trust (QQQ) - 20%

SPDR S&P 500 ETF (SPY) - 20%

iShares Russell 2000 ETF (IWM) - 10%

Vanguard Consumer Staples Index Fund ETF Shares (VDC) - 10%

SPDR S&P Oil & Gas Equipment & Services ETF (XES) - 10%

iShares MSCI ACWI ETF (ACWI) - 10%

Open Short-Term/Mid-Term Trading Ideas:

Mattel, Inc. (MAT) - Suggested 12/18/2019 @ $13.10

MACOM Technology Solutions Holdings, Inc. (MTSI) - Suggested 12/13/2019 @ $26.23

Freeport-McMoRan Inc. (FCX) - Suggested 12/12/2019 @ 13.01

The Walt Disney Company (DIS) - Suggested 12/11/2019 @ $147.58

Bausch Health Companies Inc. (BHC) - Suggested 12/6/2019 @ $28.86

Scientific Games Corporation (SGMS) - Suggested 12/05/2019 @ $27.02

Cronos Group Inc. (CRON) - Suggested 12/04/2019 @ $6.76

Deere & Company (DE) - Suggested 11/25/2019 @ $176.11

Important Strategy Tips On Trading, Investing, Portfolio Management and Using Our Service

Very important for any trader and investor who wants to be successful. To review a list of rules and disciplines to consider go here: It's a good idea to review this article from time-to-time for any newly added rules.

To view our current trading ideas log-in here: If you have any questions regarding a specific stock - even if it's something we haven't suggested - you can reply directly to this email, or call us at 619-369-9316.

John Monroe - Senior Editor and Analyst