Editor's note: Longtime Altimetry subscribers know that a while back, we teamed up with our corporate affiliate Chaikin Analytics to curate a list of what we call "Perfect Stocks."

In short, we combined our deep research with the Power Gauge – the Chaikin team's award-winning stock-picking system – to generate potential market-beating ideas with the best possible timing.

Perfect Stocks are rare... so rare that fewer than 200 stocks have qualified as "Perfect" in the past decade. And each had tremendous upside potential.

So today, we're taking a closer look at what makes a stock Perfect... and exactly what it can do for your portfolio.


Beating the market is a big deal in the world of asset management...

Just ask Bill Miller, who became a titan of the investing world when he ran Legg Mason's Value Trust from 1990 until 2011. Miller's results bested the S&P 500 for 15 years straight from 1991 to 2005, a track record that made him famous in the 2000s.

He'd be the first to tell you it sure wasn't easy...

In 1999, Miller invested in Amazon (AMZN) – then a sliver of the e-commerce giant it is today – for $80 per share. It was already down roughly 25% from its peak. Two years later, the company's stock had plunged to $5.50 per share.

Miller himself admitted to Fortune that "we were clearly wrong in buying when we did." But despite investors' fears, he stuck to his value-investing principles. He loaded up on even more Amazon stock throughout the dot-com bust.

The rest, as they say, is history.

Like Miller's Value Trust, my client Legacy Capital Management was similarly successful during that period. And that success has played a key role in boosting our investment approach here at Altimetry...

Legacy, like many other funds, boasted impressive track records with big gains...

Even the best-known stocks have down years – often dragging hedge funds down with them. But not Legacy... It similarly beat the market for over a decade in the late 1990s and early 2000s.

Our Director of Research Rob Spivey was lucky enough to learn firsthand just how Legacy delivered those results.

More than 15 years ago, Rob landed a job there after leaving Credit Suisse. So he headed west to Sacramento and learned the ropes from one of the hidden gurus of asset management.

With Legacy's strong performance, you might assume it had dozens of analysts flying all over the world... meeting with management teams and industry experts... doing channel checks... and talking to policymakers about "the next big thing."

But Legacy's process was much simpler. It was almost "Buffett-esque," but with a twist.

Rob and the Legacy team spent all day researching companies using an early version of Uniform Accounting.

They identified mispriced companies using clean accounting data. They also conducted straightforward research using 10-Ks, presentations, analyst reports, and regular news sources. They made sure to pinpoint all the factors contributing to mispricings.

That's not far off from what we do at Altimetry today. But one key step really set Legacy apart...

After reviewing accounting data and financial documents, the firm would simply wait.

Legacy didn't immediately jump to buy the cheap stocks it identified. Instead, it waited until the market started recognizing just how mispriced the stock was. Then it would pounce.

The firm used special technical tools to figure out just when Wall Street was starting to pay attention to a stock. By doing that, it avoided sitting on dead money. Each time the firm bought shares, it knew it didn't just have a great stock...

It had the perfect stock.     

These are the ingredients Rob and I implemented when we set out to replicate Legacy's market-beating approach...

Now, we're proud of our great research-based results at Altimetry over the past several years – and with our institutional clients at Valens Research for more than a decade. But we wanted to take it a step further.

We knew our results could similarly make history... if we found the right technical tool to combine with our research. And after years of searching and behind-the-scenes work, we believe we did just that.

We connected with our corporate affiliate Chaikin Analytics, one of the first companies we'd found to offer technical analysis that was as good as the tools Rob used in Legacy's investment strategy.

The one-of-a-kind Chaikin "Power Gauge" flashes green when the market starts to pay attention to a stock that could shoot higher.

When we combined those powerful signals with our deep research, we could generate the same kinds of ideas that helped Bill Miller and Rob's former fund manager beat the market for more than a decade.

That's the recipe we recreated to identify what we call 'Perfect Stocks'...

Our criteria are strict... So strict, in fact, that fewer than 200 stocks have qualified as "Perfect" in the past decade.

And the results speak for themselves...

When we combined our systems in a backtest, we saw our potential gains instantly double. Multiple Perfect Stocks shot up triple digits. One even soared almost 800% after turning Perfect.

With valuations so elevated, this is the ideal environment for Perfect Stocks. We don't want to sit on the sidelines and miss out on potential outsized gains. We also don't want to buy a great stock at the exact wrong time.

So our team has been poring over the market... and we've put together a list of our top five Perfect Stocks heading into 2025.

There are a lot of reasons to be excited about stocks today. Companies are finally starting to borrow again... we're investing in new manufacturing capacity... and the AI industry is booming, to name a few.

Each of the stocks on our list benefits from one of the major trends that's set to define the economy in 2025. To learn how to access it, click here.

And keep in mind... while many stocks are expensive today, there are plenty worth owning. We just have to be extra tactical.

Regards,

Joel Litman
December 26, 2024