I’m all about systems.
My passion lies in building rules-based trading systems that beat the pants off the market while keeping risk under control. It’s how I find order in the chaos.
But, as you know, stock price movements aren’t just blips on a screen. They represent the real buying and selling decisions of millions of investors. Those decisions don’t always follow the “rules.”
Individual traders aren’t always rational, and groups of traders acting as a herd are even less so.
But that’s what keeps things interesting in this profession.
Benjamin Graham Was a Quant
The late Benjamin Graham was Warren Buffett’s teacher and mentor. He was also the father of the investment profession as we know it today. (While the tech at his disposal decades ago was primitive by today’s standards, he too had his trading systems he followed. In his own way, Graham was what we call a “quant.”)
Graham had a famous saying that value investors like to quote, but those of us who consider ourselves systems traders should take it to heart too:
“In the short run, the market is a voting machine, but in the long run, it’s a weighing machine.”
Graham was suggesting that short-term market moves aren’t always rational, but over longer periods of time, the market gets it right.
The market awards good companies with valuations that make sense. In the same vein, good trading systems might not pick winners over every short-term period. But over time, they deliver.
2021 Look Back on the Biotech Sector
I think about this as I look at the biotech sector’s performance this year. The iShares Biotechnology ETF (NYSE: IBB) is almost flat on the year (green line in the chart below)… a year in which the S&P 500 is up almost 25%.
The story gets even nastier when you look at the performance of my favorite corner of the biotech market: genomics stocks. The ARK Genomic Revolution ETF (NYSE: ARKG) is down by over 30% year to date.
As I’ve told you many times over the past year, I believe that genomics will be the most disruptive technology of our lifetimes.
It will eclipse even the internet in terms of wealth created. It’s not a game-changer. It’s the game-changer. (For more on why you can’t ignore the genomics revolution, check out my “Imperium” presentation here.)
But even powerful mega trends like these can hit bumps in the road.
In the case of biotech and genomic stocks, some of this comes down to timing.
The COVID-19 pandemic brought a lot of new investors to these sectors. They were searching for a way to invest around vaccine efforts, and prices got ahead of themselves in 2020. Investors don’t have the longest attention spans, and as “reopening” trades came to dominate, biotech and genomics stocks got left behind.
Genomics Mega Trend Just Started
The genomics trend will be in place for years, if not decades. But knowing how to play it is key.
In Green Zone Fortunes, I look for world-changing mega trends.
But I also combine that broad macro view with a thorough quantitative analysis using my proprietary Green Zone Ratings System. I look for highly-rated stocks that stand to benefit from a powerful mega trend. I also identify stocks with an “X-factor” in place — the major catalyst that Wall Street is ignoring.
Genomics is on my mega trends shortlist for 2022, and I expect to find even more incredible opportunities in this space.
My Green Zone Fortunes readers will be the first to know about these new opportunities.
If you haven’t had a chance to watch my “Imperium” presentation yet, click here to do so now. You’ll find out why I’m convinced that the genomics revolution will be bigger than the internet.
You’ll also find the details on how to join us in Green Zone Fortunes, where my readers are already learning about the top mega trends for 2022 and beyond.
Happy holidays!
To good profits,
Adam O’Dell
Chief Investment Strategist