A Better Way To Profit Amid Vaccine-driven Market Swings

The good news on the vaccine front keeps coming … and wild stock market swings are enjoying the ride.

Pfizer Inc.’s (NYSE: PFE) announcement last week that its COVID-19 vaccine was 90% effective sent value stocks soaring.

But the rotation away from the stay-at-home growth stocks quickly fizzled out on news that distribution required an unprecedented deep-freeze supply chain.

Then this week, Pfizer’s competition, Moderna Inc. (Nasdaq: MRNA), announced its new COVID immunization was 94% effective — and it didn’t require storage at such a low temperature.

So the stock market rotation roared back with value stocks leading the way higher once again!

If the swift change in market leadership is making your head spin, I have bad news. Expect more of it.

As I wrote last week, Wall Street is having a hard time deciding between the reopening trade and the stay-at-home trade as new COVID-19 cases surge. Hopes for a vaccine have revived long-term bets on stocks beaten down by the pandemic. But record numbers of new cases keep pandemic-boosted tech stocks chasing new record highs.

In this unprecedented crisis, investors are navigating through uncharted waters with a broken compass.

But despite the uncertainty, there’s a way to find your bearings.


There are lots of ways to group stocks together.

Investors often simply categorize stocks by sector or by market capitalization.

But sometimes, the most common ways to group stocks miss the mark.

In a wild market like we see today, you need to look past those broad categories. And that’s when something called “factor investing” comes into play.

Quantitative analysts, or quants, use factors to identify stocks that have unique attributes that have historically led to outperformance.

They reveal which stocks have “alpha” potential.

Quants don’t care at all about Apple Inc.’s (Nasdaq: AAPL) latest iPhone model.

All that matters is if Apple’s stock has strong momentum, superior profitability metrics, positive news flow … quants have identified hundreds of such factors.

And that’s why I prefer factors as the first step in my investment process. It gives me a head start in pinpointing stocks that have the right ingredients to move higher.

Full story on BanyanHill.com

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