“Cigarettes and aspirin” sounds more like a crude hangover remedy than an investment theme.
But those are exactly the kinds of stocks now rated as “Bullish” in my Green Zone Power Ratings system.
Stocks rated 60 or higher are officially earn a “Bullish” rating, and my research shows those stocks have historically outperformed the broader market by double on average.
Meanwhile, tech stocks continue to dominate the headlines.
Just today, reports surfaced that the U.S. government cleared the way for NVIDIA (NVDA) to sell its chips to 10 new Chinese buyers.
And Cisco Systems (CSCO) – a boring, staid company that hasn’t been newsworthy for 20 years – is up 14% today after it reported that AI demand was driving growth.
But beneath the surface, my system is quietly nudging us to diversify, as many of the newest “Bullish” names share a low-tech, defensive flavor.
With that in mind, let’s examine the newly “Bullish” stocks in the S&P 500 Index.
S&P 500 New Bulls
I ran my usual screen for S&P 500 companies that popped up as “Bullish” this week, and this is what I came up with:
It’s not all boring…
Hard drive maker Western Digital (WDC), which has been a major beneficiary of the AI infrastructure trade, made the list.
Western Digital rates a monster 94 on its momentum factor and sports “Strong Bullish” ratings on its quality and growth factors too.
The buildout of America’s AI infrastructure has created unprecedented demand for data storage. But you must still exercise caution here…
WDC shares have nearly doubled since the end of March, and the shares of rival Seagate (STX) have more than doubled. Over the past 12 months, Western Digital is up over 900%.
This corner of the market has “gone parabolic,” and this is where sell discipline becomes incredibly important.
Western Digital has been a holding of Infinite Momentum’s Tech Titans portfolio since February, and it’s maintained its place because my system ranked it as one of the 10 stocks most likely to maintain its strong momentum over the past three monthly rebalancings.
Will it still be in the portfolio in June?
That’s entirely dependent on whether it continues to make the cut. So long as it continues to rank in the top 10, it can stay in the portfolio indefinitely. But when my system finds a potentially stronger “runner” to take its place, we’ll sell the stock and move on.
That’s the system. I know before I buy the stock how I will eventually sell it. That’s how I control risk. If you’re looking for a disciplined way to identify strong momentum stocks before they become household names — and just as importantly, a clear system for knowing when to exit — that’s exactly what I show subscribers inside Infinite Momentum Alert.
You might want to balance high flyers like Western Digital with some of the “boring” stocks making the list this week.
Altria (MO), the owner of Phillip Morris and other tobacco brands, is one of the most defensive stocks in the entire S&P 500. Demand for cigarettes doesn’t fluctuate much from year to year. Smokers tend to keep puffing away regardless of economic conditions.
Yes, inflation makes everything more expensive, but a cigarette represents an escape. And smoking rates actually increase during recessions due to financial stress.
Altria rates exceptionally well on its volatility factor and pays a nice 6% dividend.
For another steady-eddy income machine, take a look at Realty Income (O). The real estate investment trust’s monthly dividend makes it a perennial favorite for income investors, and it yields just over 5%.
Realty Income owns a sprawling portfolio of high-foot-traffic, mostly “tech proof” properties like convenience stores and grocery stores. It’s as close to a bond as you can get while still being invested in the stock market.
If you’re looking for a conservative counterweight to your more speculative tech positions, Realty Income and Altria are solid options.
New Bulls Outside of the S&P 500
Let’s cast the net a little wider and look at the newly “Bullish” stocks outside of the S&P 500.
I ran a screen for the top 20 stocks with the largest score increases over the past month, and this is what popped up:
Continuing with the theme of staid and defensive, German pharmaceutical Bayer AG (BAYRY) made the list, seeing its Green Zone rating jump by 34 points over the past month.
Bayer sells products across two main areas. In health care, it makes prescription drugs, over-the-counter medicines like aspirin and Aleve and medical devices. In agriculture, the company sells pesticides, herbicides like Roundup and genetically modified seeds to help farmers grow crops more efficiently.
One thing all of these businesses have in common is their inherent defensiveness. Whether or not inflation continues to tick higher, you’re going to take an aspirin when you have a headache… and farmers will still need pesticides for their crops.
Not surprisingly, Bayer rates a “Strong Bullish” 89 on its volatility factor. But interestingly, it also rates an even higher 91 on its momentum factor. So, even amidst the Melt Up in tech stocks, it looks like investors are quietly piling into conservative options as well.
For a more conservative income option, consider One Liberty Properties (OLP) shares, a REIT specializing in gritty industrial properties. The REIT owns 112 properties spread across 33 states and pays a nice 7.7% dividend.
To good profits,
Adam O’Dell
Editor, What My System Says Today
P.S. Over the past several months, I’ve been refining the approach behind my long-running Max Profit Alert service to better fit today’s market environment – with a stronger emphasis on generating reliable cash-flow opportunities instead of simply chasing market momentum.
That shift has led to the launch of Max Income Deals, a refreshed service focused on straightforward “deals” that can help create steady income through a disciplined, repeatable process.
On May 19 at 1 p.m. ET, I’ll host a LIVE presentation where I’ll demonstrate how these deals work from start to finish, showing the process in real time and answering questions along the way.
