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52 Trades to Beat the Mutual Fund Slump

Here's a way to take the pulse on my latest buying opportunities


Monday was a good day to be a stock picker. Shares of Red Robin Gourmet Burgers (RRGB) popped 13% after the stock was upgraded by Raymond James. Barnes & Noble (BKS), SodaStream (SODA) and China Distance Education Holdings (DL) were also big winners. Meanwhile, it was essentially a flat day for the broader market, with the Dow finishing up less than eight points ahead.

One factor that is weighing down a bit on the stock market is redemptions from mutual funds and ETFs. Last week, Citi Research reported that in the previous five trading days that $28.3 billion was redeemed from stock mutual funds and ETFs, of which, 95% came from the ETF industry. Some major tactical ETF managers, like Good Harbor, built massive cash positions at the start of February and The Wall Street Journal reported last week that these redemptions hit medium-sized companies the hardest a week ago today.

So the case for stock picking appears to be getting stronger. Now, I have nothing against indexing or tracking mutual funds. I was trained in indexing at Berkeley, but the only time to track indexes is when the market is in a low quality rally. The current market is obsessed with quality and it is getting narrower. There are fewer winners this year compared with last year, and there will be even fewer winners as the year goes on. This is not an environment suited to indexing, like it was in 2009 (when the market went higher on a lot of new volume) or in the first six months of 2013 (when we saw what I like to refer to as a “crap rally”).

The fact is that the market went to quality in the third quarter of 2013, and that has only picked up through the beginning of 2014. So it’s all the more important that we stick to the top stocks and not make any big sector bets. To get a pulse on the latest buying opportunities (and the stocks you should now avoid), let’s look at these stocks which have been upgraded and downgraded this weekend. Over the weekend I noticed 52 big-name stocks were on the move and have revised their ratings to reflect the latest data. Let’s take a look:

52 Recommendations Straight Out of Portfolio Grader


Last Week’s Holds, Now Buys

Symbol Company Name Quantitative Grade Fundamental Grade
ADM Archer-Daniels-Midland B C
ADSK Autodesk B B
AFL Aflac B C
AKAM Akamai Technologies B B
AV Aviva plc Sponsored ADR B B
DD E. I. du Pont de Nemours B B
DG Dollar General B B
MCO Moody’s A B
MNST Monster Beverage B C
RYAAY Ryanair Holdings Plc Sponsored ADR B C
SBUX Starbucks B C
SIAL Sigma-Aldrich Corporation B B

Last Week’s Sells, Now Holds

Symbol Company Name Quantitative Grade Fundamental Grade
ABB ABB Ltd. Sponsored D C
AGN Allergan D B
ALL Allstate C C
BUD Anheuser-Busch InBev D B
BXP Boston Properties D C
HAL Halliburton D C
HOT Starwood Hotels & Resorts Worldwide D B
KMX CarMax D C
LB L Brands C C
LBTYA Liberty Global Plc Class A C C
MON Monsanto D C
NVO Novo Nordisk A/S Sponsored ADR Class B C B
PAA Plains All American Pipeline D C
SLF Sun Life Financial C C
SNE Sony Corporation C D
SWK Stanley Black & Decker D C
TD Toronto-Dominion Bank C C
TOT Total SA Sponsored ADR Class B C C
TTM Tata Motors Limited Sponsored ADR D B


Last Week’s Buys, Now Holds

Symbol Company Name Quantitative Grade Fundamental Grade
CERN Cerner C C
CHK Chesapeake Energy C C
CHKP Check Point Software Technologies C B
HCA HCA Holdings B C
HRL Hormel Foods C B
LNKD LinkedIn C D
STX Seagate Technology C C
TEVA Teva Pharmaceutical C C
GLW Corning B C

Last Week’s Holds, Now Sells

Symbol Company Name Quantitative Grade Fundamental Grade
BK Bank of New York Mellon D C
CNI Canadian National Railway D C
CPB Campbell Soup D C
DUK Duke Energy D C
KRFT Kraft Foods Group D C
MJN Mead Johnson Nutrition D B
MPC Marathon Petroleum D B
SSL Sasol Limited Sponsored ADR D C

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