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Why Long Term Momentum Stocks Are A Good Investment In Volatile Markets

In our 2016 Outlook Report, we wrote that we expected market volatility to continue rising in 2016. We identified three key success factors for investors, being:

  • Patience: wait for a correction to take place, i.e. wait for a limited number of windows throughout the year to take positions (entry and exit).
  • Precision: the timeslot to take positions will be limited, so picking the right timing will be key, but simultaneously the number of winning stocks will be restricted, so stock picking will be key.
  • Perseverance: dedication to research the market in order to identify the trends that are unfolding across markets. Most likely, the time spent in research will not be rewarded in 2016.

We said that bifurcation, combined with higher volatility, would continue in 2016, which is the reason why stock picking and timing entry / exit points would be key. The focus in stock picking, we said, should be on quality names, the ones that truly deliver value, which is why we consider ‘momentum stocks’ so important.

So far, all our expectations outlined in our outlook report have come true (the only thing we did not see coming was such a sharp rise in gold).

When looking at momentum stocks, we revise in this article the three favorite names we have been writing about in the last couple of months. Below are the charts of Nike (NKE), Fiserv (FISV) and Extra Space Storage (EXR). We discussed in length why we like these companies, but now is a good time to do a sanity check on our viewpoint.

The charts clearly tell us that these stocks are clearly standing strong, making the case for this type of stock during turmoil.

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