In his book Adventure Capitalist, Jim Rogers wrote: Markets will rise higher than you think is possible and fall lower than you can possibly imagine.
It’s right and, more importantly, exposes the only two ways to make serious money in stocks.
One way to do it is to buy beaten up stocks that are starting to finally go up after years of declining.
The other way is to buy into a megatrend with so much growth ahead of them the market still hasn’t fully realized it yet.
The best way to find the winners in either group are to look at the stocks that are doing the best.
After all, stocks tend to move up the most in their earliest part of the recoveries. And stocks tend to rise steadily after they have already done so for some time.
That’s why today we’re going to analyze some market data on the top-performing stocks of this year to show us where to look for the biggest gains in 2015.
Double Your Money On These Stocks...Again?
Stock market researcher Ivaylo Ivanov recently conducted a study of the top-performing stocks in 2014.
After discounting a lot of illiquid microcap stocks, he found there were a total of 60 stocks that doubled in the first 11 months of the year.
An analysis of those 60 doublers shows what industries to be looking in 2015. These are the rising tides that will lift a lot of boats.
Here they are.
Thankfully for The Cheap Investor and Profit Alert readers, the sector with the most 100%+ winners was biotech stocks.
As we’ve discussed in the past, biotech stocks are in a multi-year mega-bull market.
The biotech bull has propelled more than the average share of biotech stocks to new highs. And it made biotech the sector with the most doubles in 2014. Ivanov’s analysis found 19 of the 60 doublers were biotech.
Of course, I realize this performance is likely to turn off more investors than it will attract.
But the key here is biotech is still rising. This week the Nasdaq Biotechnology Index set new all-time highs once again.
This I wrote in my Top 5 Stocks to Ride the Biotech Bull report:
Biotech stocks have the wind at their backs… there are truly massive gains ahead. If history is a guide, we’re looking at potential average gains of more than 300%.
That’s all based on history of how we know markets work, how they tend to get overheated, and how to ride on these major cycles profitably.
Biotech’s great and we’ll continue to cover it here, but there’s a lot more data to draw from the database of doubling stocks.
The second sector with more than its share of doublers was foreign stocks.
In all 13 foreign stocks doubled so far in 2014. China had the most doublers. Israel was second with three. And there is still probably more doubles for these markets and more in the next year.
You’ve read here in these pages why emerging markets are cheap, have been for years, and are showing signs of a massive recovery.
Many foreign markets are so depressed right now we know that when they go (whether it’s a year or two away), they’re going to fly.
Granted, there have been and will be a few false starts. But even the false starts can be quite profitable too. And you have to buy the false starts so you don’t miss out when the big rally comes.
Did you miss biotech’s initial run from 2009 to today?
In a few years, many foreign stocks will be hitting new all-time highs like biotech stocks are today.
The final leading sector in doubling stocks is the one that presents one of the greatest opportunities.
The reason: it’s a huge and growing industry and the market still doesn’t comprehend completely how big it’s going to be.
It’s mobile technology. And it’s massive growth has driven a number of doublers this year.
The big winners in this sector were the semiconductor stocks that power all the mobile devices like smart phones, tablets, laptops, and the infrastructure that provides the data to all these devices.
Companies like Skyworks Solutions (SWKS) and TriQuint Semiconductor (TQNT) were among the doublers.
These two companies provide a lot of the processing power for wireless system infrastructure.
In other words, they make wireless networks work.
And there’s going to be a lot more mobile network capacity to “make work” work in the years ahead.
The International Data Corporation, a highly respected technology research company, predicts “wireless data will balloon to 13% of telecommunications spending” in 2015.
So even though wireless spending has been soaring recently, at 13% it’s still a fraction of what this market will eventually become.
Ride the Bull
That’s all three sectors and opportunities every investor should be looking at now.
Remember, stocks that are going up will tend to go up far higher than most investors can ever expect. Stocks that are falling will tend to fall far lower than most anyone expects.
That’s why it’s important to hold onto your winners. Ivanov found that 16 of the 60 doubling stocks this year also doubled last year. And why it’s equally important to cut your losses early on too.
Tomorrow, we’ll be revisiting the last sector - mobile technology - to see how one of my all-time favorite stocks is a great way to ride this nascent bull market and get a high degree of income safety too.
If you’re looking for big potential gains without much risk, you’re going to like it.
We’ll get back together then.
Have a good weekend.