Yesterday, we kicked off our Innovation Investor holiday shopping spree.
That is, over the past few weeks, we’ve been closely watching a host of fundamental, technical, and sentimental indicators to try and identify the stock market bottom. Last week, nearly all those indicators started flashing. That tells us that the weight of evidence today suggests a bottom has either arrived or is very close.
In other words, this bear market is basically over. History says what comes next is a massive bull market. So, in preparation for this new bull market, we’ve planned a growth stock buying spree.
That buying spree started last night with a pair of new buys in Innovation Investor.
The first stock is a fallen tech star, trading at its cheapest valuation in a decade, with a potential game-changing catalyst on the horizon. The second is an up-and-coming energy powerhouse, pioneering a tried-and-true solution that will help fix the world’s current energy crisis.
Both stocks look due for enormous gains.
But they are just the start of what we expect to be our biggest-ever stock shopping spree over the next few weeks.
The time to buy has arrived. Here’s why.
The Stock Market Bottom Is Likely Close
If you listen to the mainstream media narrative, stocks are crashing and will likely keep crashing for many months to come.
But the mainstream media narrative was just as negative in March 2020, when stocks bottomed after the COVID crash and before they soared over the next year. It was just as negative in March 2009, when stocks bottomed after the 2008 financial crisis and before they soared over the next year. It was also just as negative in late 2002, when stocks bottomed after the dot-com crash and before they soared over the next year.
The mainstream media narrative doesn’t drive stocks, nor does it determine stock market bottoms. Instead, that’s what the data does. And today’s data strongly suggests the stock market bottom is very close.
The S&P 500 trades at around 16X forward earnings. Over the past 30 years, most stock market crashes bottomed around 15X forward earnings – right where we are today. The notable exception is 2008, and this is not that.
Investor sentiment (as measured by the number of bears in the weekly American Association of Individual Investors (AAII) survey) is as bearish as it has basically ever been. There are only a few parallels: the early 1990s and early 2009 (both at the stock market bottom).
Financial conditions have tightened to levels that are historically consistent with stock market bottoms, as measured by Bloomberg’s Financial Conditions Index. The S&P 500 is running into its 200-week moving average, a level at which most bear markets of the past 50 years have bottomed. The market’s weekly relative strength index has fallen to oversold levels consistent with the final innings of a bear market.
Consumer confidence is rebounding from super depressed levels in a way that it only does when bear markets are nearly over. The CBOE Volatility Index (VIX), a measure of volatility across the market, has spiked into the 34 to 45 range that is historically consistent with market bottoms. The number of stocks trading above their 200-day moving average has dropped to 16%. That reading is consistent with previous bear market bottoms.
The put/call ratio in the options market has spiked above 1 – something it only does near local stock market bottoms. And according to Wall Street analysts, the S&P 500 is as “undervalued” as it has nearly ever been., The index is trading more than 20% below their consensus price target – a reading also consistent with previous market bottoms.
You see, a plethora of data out there suggests that the stock market has already bottomed or is very close to it.
That’s bullish. Do you know when the best time to buy stocks is? Right after a bear market ends.
After the bear market of 2020 ended, stocks soared 27% in 2021. After the bear market of 2018 ended, stocks soared 29% in 2019. When the bear market of 2008 ended, stocks soared 23% in 2009. After the bear market of 2002 ended, stocks soared 26% in 2003. After the bear market of 1990 ended, stocks soared 26% in 1991. And when the bear market of 1974 ended, stocks soared 31% in 1975.
You get the point.
The best time to buy stocks is in the year after a bear market strikes. That means 2023 is shaping up to be a record year for the market. Ahead of that, we’re going on a growth stock shopping spree.
The Types of Stocks We’re Bullish On
At the moment, we like two types of stocks to buy now:
- Beaten-down, high-quality growth stocks with massive rebound potential.
- High-growth energy stocks with breakthrough solutions to today’s energy crisis.
We like the first group because, when we look at the growth stock landscape, we see lots of stocks trading more than two standard deviations below their historically “normal” valuation multiples. Many of these stocks are as cheap as they’ve been in a decade or more. And a lot of them remain supported by strong internal fundamentals.
Therefore, these stocks look due for a massive rebound once the market stabilizes and bounces back in 2023. Our analysis suggests there are dozens of growth stocks that could soar more than 100% over the next year alone.
Meanwhile, we like high-growth energy stocks here and now because the world is facing an enormous energy supply shortage crisis. The companies that can help fix that crisis with breakthrough solutions will unlock extraordinary economic value in the coming years.
So, we kicked off our holiday stock shopping spree Monday by buying one beaten-down, high-quality growth stock with massive rebound potential, and one high-growth energy stock with a breakthrough solution to today’s energy crisis.
The first stock has the added benefit of being very close to a potential game-changing catalyst that could spark a mega rally in shares. The second stock, meanwhile, is having its biggest breakout in a decade – and we don’t see the breakout ending anytime soon.
Find out the names of those stocks to buy now.
The Final Word on the Top Stocks to Buy Now
Here’s the thing that no one tells you about bear markets when you’re in one: Bear markets always end.
This bear market looks like it’s about to end.
To be sure, some black swan risk could emerge out of nowhere and absolutely crush the market, like the Lehman Brothers bankruptcy did in late 2008.
However, such a risk looks unlikely. In the absence of a black swan risk, the data suggests this bear market is on its last legs. Up next? A big market rebound, wherein stocks likely rally 20%-plus in a year. Then a new secular bull market will follow. And stocks will likely gain about 10% per year into the late 2020s.
Said differently, a generational turning point in the stock market is likely upon us. Dip-buyers today will likely be handsomely rewarded in a one-, two-, and five-year window.
That’s why we’re going on a holiday stock shopping spree. The best stocks in the market are on sale right now. We’re buying them.
Find out the stocks we’re buying right now.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
