The One Group Of Stocks That Make Sense Right Now…

Each week when I flip on my Maximum Profit system, I lean back in my chair and sip on my tea as it sorts through thousands of stocks.

When it’s done working, I sit up and begin working through the list. I have an enormous amount of data at my fingertips, but I filter it down to the basics. Ticker symbol, company name, industry, market cap, country, and of course relative strength and cash flow relative strength.

One of the first things I’ll scan through is what industries most of these ticker symbols are in. From this, I can usually tell which sectors have the most momentum… even if I’ve been away from the markets for some time (like I was over the 4th of July).

As my longtime readers know, when a stock or sector has momentum, that’s typically where we want to be.

When we are in a major bull market several industries are usually leading the pack. But this year it’s been 98% energy stocks.

There’s just one problem… As I wrote about recently, even this sector has shown some signs of fading momentum. So when I ran my latest scan, energy stocks were few and far between.

Not Much Is “Working” In The Market Right Now

As I scanned through the ticker symbols, I began to notice something strange. The common “industry” for these ticker symbols read as “financials”. But I didn’t recognize hardly any of them. This is pretty rare as ticker symbols to me are about as good as the company name. Just like every company has some peculiar acronym for their work, ticker symbols are those for me.

I dug deeper and realized that all these “Financial” companies were just SPACs, or special purpose acquisition companies. These were all the rage over the last couple of years as they’ve been dubbed as a “backdoor” IPO.

I won’t get into the nitty-gritty of these companies, but the bottom line is that they aren’t real companies… yet. These “blank check” companies get listed and have two years to find a suitor (a real company), which they then merge with, and that’s how the company becomes publicly traded.

I’ve learned that the large majority of these SPACs are really just a way to siphon money from regular investors like you and me and line the pockets of these fat cats on Wall Street.

So it was a bit disheartening to see all these SPACs make it through the system. I thought it was going to be another week where we stood pat with 100% cash.

As frustrating as it might be, I was prepared to do it.

As I wrote recently:

“… sometimes the best option is to do nothing. Remember, we can always get back into trades at a later date when the dust settles. What we can’t make up for is a massive black eye in our portfolio.”

I still stand by that sentiment, which is why I haven’t made any significant moves in the market for the past couple of weeks. But, through all the SPAC rubble, I did find a pick to dip our toes back into the proverbial market waters.

And if my hunch is right, this corner of the market could be crucial to finding winners in a recession…

Why Discount Stores Should Gain Momentum

While I can’t share the name and ticker of this pick with you today, I will tell you what makes this pick so compelling to me – because it just might be the one corner of the market with any kind of real momentum.

The pick in question is a “discount” store chain. Some might even call it a “recession-resistant” stock. And the fact that it has strong momentum is a dead giveaway that folks are feeling the pinch.

Think about it… With inflation soaring, real incomes under pressure, and investors witnessing big losses in most of their investments, confidence in the U.S. economy (and the Federal Reserve) is eroding.

People are shifting away from premium products and looking to save a few bucks at discount stores. It makes sense… A stick of butter costs 23% more than it did in December. A gallon of milk is up about 25%, and bacon is 35% higher.

Higher prices are shifting consumer behavior, which should provide momentum for discount stores. Names like Dollar Tree (DLTR), Big Lots (BIG), Dollar General (DG), Ollie’s Bargain Outlet (OLLI) are just a few to consider researching and putting on your watchlist.

In the meantime, my colleague Nathan Slaughter has been telling his followers about another corner of the market where can you still find big winners…

In this era of war, inflation, and pandemic, corporate consolidation is the name of the game. Even the whisper of a “mega-merger” can hand investors enormous returns. And Nathan has just pinpointed a potential takeover deal that could dwarf them all.

Want to get in on Nathan’s next big trade? Click here for details.