The Best Performers the Market ISN’T Talking About

There’s a lot of chatter about performance in the markets lately. Folks say the rally we’ve seen since the bottom in March isn’t broad-based.

That’s true.

Some big-name, “tent-pole” stocks are leading the S&P 500 higher, while the rest lag. But if you want to look for real outperformance, I have an idea for you.

First, let me give you some background. The S&P 500 is a market-cap weighted index. That means stocks are weighted according to their current stock market value.

Currently, just five companies make up more than 21% of the index:

  1. Microsoft (Nasdaq: MSFT, Rated B-)
  1. Apple (Nasdaq: AAPL, Rated B-)
  1. Amazon (Nasdaq: AMZN, Rated C+)
  1. Facebook (Nasdaq: FB, Rated B-)
  1. Alphabet (Nasdaq: GOOGL, Rated B)

These are all leading tech names, and they’ve all been performing very well. Amazon is up 62% since the start of the year. Wow!

So, these stocks are pushing the S&P 500 higher, leading the index up 0.56% this year. That doesn’t sound like a lot, but we had that monster sell-off in March during the liquidity crisis. So, the index has a lot of lost ground to make up.

Meanwhile, an equal-weighted version of the S&P 500, the Invesco S&P 500 Equal Weight ETF (NYSE: RSP, Rated D+), is actually DOWN 7.94% for the year.

So, you can see why the big stocks are important, and why investors keep throwing more and more money at them. Success draws more money, which leads to more outperformance.

But you know what? There’s another group that is outperforming all of them, with the exception of Amazon. This group is also leaving the S&P 500 in the dust.

I’m talking about gold miners, as tracked by the VanEck Vectors Gold Miners ETF (NYSE: GDX, Rated B-).

Here’s a chart tracking the performance of the GDX against the S&P 500 and RSP since the start of the year.


 

That’s just the index. There are individual components of the GDX — Alamos Gold (NYSE: AGI, Rated C) and Gold Fields Ltd. (NYSE: GFI, Rated C) come to mind — who aren’t just outperforming their index, they’re outperforming Amazon!

There are a lot of reasons why gold is going higher. I’ve covered those reasons in previous article, including this one and this one. And we keep getting more bullish news.

For example, physical gold ETFs keep buying the metal hand over fist. Exchange-traded funds bought 21.8 million ounces so far this year. Total gold held by ETFs is up 26% this year to 104.7 million ounces, the highest level in at least 12 months!

Do I think this will continue? Oh, yeah! Traders and investors alike are watching with a mix of fascination and horror as the Fed pumps more and more money into the system like it is overinflating a zeppelin.

Together, the Fed and Treasury have —  so far — pumped about $4 trillion worth of money into the system through money printing, the paycheck protection program, loans to small businesses and handouts to every Tom, Dick and fat-cat corporation that shows up with hat in hand.

This sounds inflationary, right? The Fed certainly isn’t worried about inflation. In fact, Federal Reserve Bank of San Francisco President Mary Daly and Richmond Fed President Thomas Barkin said earlier this month that outsize inflation isn’t a concern in the current crisis.

Well, if the Fed isn’t worried about inflation, while doing the most incredibly inflationary things, then investors are going to buy more gold. Because you can print money from here to Kingdom Come. You can’t print gold.

And as for miners — well, just last week, I told you why Gold Miners Are Fundamentally Undervalued.

So, while gold miners have done very well and outperformed this year, there’s plenty of reasons why this move in miners has just begun.

Wall Street and Washington may think this bubble is too big to fail. Common sense might tell you otherwise. When the crash comes, you’ll want to own precious metals and the miners leveraged to them.

And THAT’S what that chart I showed you is telling you. The smart money knows this already. That’s why they’re buying miners. The question is, what are YOU going to do? I gave you some great ideas in this article. The choice is yours.

All the best,

Sean

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Comments 2

  1. PAM July 21, 2020

    I THINK YOU ARE SO CORRECT AND REALISTIC..THANK YOU…

    Reply

  2. David July 16, 2020

    Beware crypto mining equiptment being over 90% produced in China with China enties controlling 60 % of crypto mining activities. Remember the Iran centifuge hack. Expect China to digitally grab aggressively.

    Reply