This Powerful Tool Helped Us Invest During the Pandemic

Rob Spivey

In early 2020, the world was in panic...

The coronavirus was spreading rapidly, wreaking havoc around the globe. Whole countries were on lockdown, and economies were at a standstill.

Even still, we knew it wasn't investing Armageddon... and there would be abundant opportunity.

There was a dramatic shift in how businesses and consumers operated. Folks were working, learning, and even buying groceries from the comfort of their own homes.

It's what we call the "at-home revolution."

We understood that with people now working remotely, getting in touch with colleagues would be a little different. Employees would need the equipment and software necessary to operate from home.

But it wasn't just businesses that needed to figure out how to stay productive while remote... Students were learning and attending class online, too.

Even more, with families stuck at home, they needed ways to entertain themselves. They were streaming more content and playing more video games.

In short, houses needed to be smarter. They had to be equipped with everything to live and work at home with ease.

This trend was going to yield some clear winners...

You just had to know where to look. And that meant more than picking stocks at random.

Before you zeroed in on individual companies, you had to get the sector right.

Now, we regularly analyze sector signals to identify which areas of the market could be big winners each year.

We've been doing this institutionally for more than a decade. The main goal – aside from all the underlying analysis we do every day – is to pinpoint the stocks set to outperform the market.

At the onset of the COVID-19 pandemic, one sector in particular stood out to us... technology.

It made sense. The at-home revolution was pushing folks to invest in entertainment and remote-work capabilities. Technology could help people work, learn, and play at home.

And it wasn't just Big Tech companies that stood to benefit. Semiconductors – the companies that make the tiny chips that power our devices – were also set to profit. These companies supply Big Tech. So when the biggest players do well, so do the chipmakers.

We recommended a number of tech stocks to subscribers... including chipmaker Lam Research (LRCX) and online-payments platform PayPal (PYPL) in our Altimetry's Hidden Alpha monthly service.

We closed both a little less than a year and a half later for two 112% returns.

In order to earn these outsized returns, we leveraged a powerful tool...

We first introduced you to the ETF Analyzer last week. It's a sector analysis system that cuts out as-reported distortions to issue grades for exchange-traded funds ("ETFs") and mutual funds.

We've been using some form of sector analysis for years. Now, we're finally able to offer it to everyday investors.

The ETF Analyzer puts together all of our Uniform Accounting data. Then, it determines the best sectors to be in right now. Here's how we used this data back in 2020...

At the time, our sector analysis showed us that technology – as measured by the Technology Select Sector SPDR Fund (XLK) – was going strong.

XLK tracks a basket of S&P 500 tech stocks. And it was one of only two sectors that got an "A" grade for overall sector performance.

Take a look...

2020 ETF Analyzer Grades

Sector

Grade

Communication Services

D

Consumer Discretionary

D

Consumer Staples

D

Energy

C

Health Care

D

Industrials

A

Materials

D

Real Estate

D

Technology

A

Utilities

B

Based on this data, we could see that the tech sector was set up for success. That was half the battle.

Then, we just had to find tech stocks that were benefiting from the at-home revolution.

Today's economy doesn't look like it did in 2020... nor do the different corners of the market. But that doesn't mean you can ignore what these sectors are doing today.

As my colleague and Altimetry founder Joel Litman wrote yesterday, 50% of a stock's movement can be explained by the sector that's powering it.

That means it doesn't matter how much you like a stock or how strong the fundamentals are... If the sector is working against it, then it probably won't reach its full potential.

Regards,

Rob Spivey
December 6, 2022

P.S. This has been one of the market's most volatile years on record. And investors are nervous heading into 2023. That's why Joel and I believe it's more important than ever to examine the underlying sector before putting your money to work in stocks.

Joel recently released a brand-new collection of special reports to help you put the pieces together. He detailed the three most promising sectors for the coming year... and the stocks he believes will be the biggest winners in each.

Plus, he shared his "Winning Sector" portfolio, designed to help you take advantage of these industry tailwinds. Learn how to get access right here.