Imagine watching an NBA basketball game, and Lebron James is just lighting it up. He has just made six shots in a row. The game is close, and Lebron is clearly lining up to take another jump shot.
What are the odds that he is going to make that shot?
In basketball, players and coaches will often talk about the “hot hand.” This refers to the phenomenon that someone who has made several baskets in a row has a greater chance of making the next one.
But that’s actually a fallacy. The odds that Lebron James – or any other player – will make his next shot remains the same as always, regardless of how many baskets they have made previously.
The belief in the “hot hand” is a well-studied example of Recency Bias.
And if you don’t know the technical term, you no doubt understand and experience Recency Bias.
Take your annual performance review at your job. Odds are that your supervisor remembers a lot of the work you’ve done in the last month but not as many of your accomplishments from nine months ago. As a result, you’re more likely to be judged for the last month than the last year.
This same bias likely influences your decisions as an investor, and therefore impacts your portfolio as well.
The human brain is a marvelous tool for creating art, music, language, and engineering feats, but it can be a terrible tool for investing.
The more you know about the workings of your own mind, the “bugs” inside it, and how they work against investment performance, the more you can develop strategies to mitigate the negative effects of those bugs.
Let me help you with that. In today’s Market360, we’ll detail Recency Bias, how it works, and how you overcome its limitations to find the best stocks to invest in…
Faster Profits with Minimal Risk
In investing, Recency Bias occurs when a stock has momentum, either up or down. If a stock has been going up for the last six months, folks naturally believe it is likely to keep going up.
The inverse also happens. If a stock hasn’t gone up in six months, it seems likely to not turn around and go up any time soon.
On a wider level, if it has been years since the last bear market, investors are more likely to believe one is not coming soon.
But using Project Oracle, the latest cutting-edge update to my stock-picking system, we don’t need to fall into the Recency Bias trap and rely on momentum to tell us which stocks to buy or sell. We use math, incredibly sophisticated computers, and now the absolute latest technology to find stocks that are about to break out to the upside – regardless of how they have performed recently.
I am excited about the incredible predictive algorithm that’s at the heart of Project Oracle and its ability to identify stocks that are positioned to move quickly and generate big returns with minimal risk.
To give you just one example, Project Oracle identified a company called Himax Technologies (HIMX) in late 2020 when the market was under pressure. It rallied nicely, and I closed it earlier this year for a 109% gain.
It’s not a big stock – its market capitalization is a little over $1 billion. Most analysts don’t even cover stocks this small, or they recommend them after their big run up. That’s where Recency Bias can cost you money.
However, as we just saw, if you can find the right stock BEFORE that next major event… you can make large gains in a much shorter period of time.
But you don’t have to let your future be governed by Recency Bias or any of the other biases we have covered.
All you need is the right tools.
That’s why I developed my stock grading system.
Instead of eyeballing a stock chart and seeing how it has performed lately, my system runs the numbers using thousands and thousands of points of data (fundamentals as well as momentum indicators). It finds the very best names and sends me an alert that a stock is about to skyrocket. Because the alert is developed using only data, I don’t have to worry about falling victim to Recency Bias.
Join me now and you won’t have to worry about that, either.
Instead, you can go back to investing in your retirement. And if you’ve already started investing, the gains with my Project Oracle can help you supercharge it.
I’m expecting some of the fastest gains in my career – we’re talking about moves of 100%, 200% and even 500% in months instead of years. That being said, the key is not to get impatient… or greedy.
My system isn’t capable of that; it simply looks for the same precursors that have portended every great stock play of my career. Click here to find out more.
P.S. Project Oracle recently pinpointed another opportunity, and I tell you exactly what it is in a special briefing on this cutting-edge stock research system.
Project Oracle uses artificial intelligence (AI) technology I’ve been developing for 40 years to pinpoint some of the fastest-moving stocks on the market.
This new stock it recently pinpointed is at the heart of the booming electric vehicle (EV) market. And it’s a recommendation that has the potential to double your money or more over the next three months.