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How to Chase the Market Rally

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They say the best athletes make it look easy; their swing so fluid, their sight so sharp, their hands so certain. Whatever the case may be, their performance is as instinctive as it is smooth. And so it is with the best investors, who have the consistency and confidence to play their game, and not be enticed into something else.

For Gene Peroni, portfolio manager at Advisors Asset Management, his game is simple: "Identify quality companies, with good earnings growth, good cash flow, and in some cases nice dividends", that are technically "trending higher, not ones that are still in troughs."

"Once we've identified those stocks...I think the best tack is to buy and hold through the short-term volatility," Peroni explains in the attached video.

While many investors may fear that they have missed the move of the past week or so, this Philadelphia-based fund manager sees higher levels ahead

"It would seem like you were chasing the markets," Peroni says. "But when you really compare that with the upside potential before the end of the cycle -- I believe it's above 16,000 (on the Dow Jones Industrial Avg.) over the next several years -- then the risk to reward, even at these levels, remains very attractive. For stocks individually, it's an even better outlook."

Cyclicals, and what he calls the "market leaders", are his favorites right now particularly Transportation plays like airlines, truckers, shippers as well as rails "right down the line." Kansas City Southern (KSU) being one of his favorites.

In addition, if you combine his expectation that there will be a migration into small and midcap names, with his affinity for industrials, aerospace and defense names like TransDigm (TDG) make the cut over their large cap peers.

And finally, Peroni is getting long energy, which he says has good sub-sector underlying strength in groups like oil and gas drillers, oil services and oil technology. Here, he singles out Concho Resources (CXO) as a "leadership stock" that's worth a look.

What do you think? Is it time to dive in or cash out?

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119 comments

  • ThoughtfulLiving Notes  •  5 months ago
    They are trying to draw in more suckers The Wall Street professionals need to sell to someone.
    • Frank Falco 5 months ago
      Say their partner you hit the nail on the head that is exactly correct. They are trying to bring in more suckers. While you thing they tell you can buy stock for a one dollar so they can get you money in the market. (bring in more suckers)
  • Sundog  •  5 months ago
    We're always "chasing the market" because Insiders know in advance what the Government(s) are going to do.
  • Rascal  •  5 months ago
    Don't be scammed.....trouble in Europe, high unemployment in US, housing still unstable, and they want to pull people into the market so they can sell and make profits on your investment...don't let your emotions take over....remember investment firms want your money!
    • CK 5 months ago
      The only thing taking over is your fear. Yes, there are major problems. Unemployment has been a 9% for 2 years now. The housing market has been dead for slightly longer. But big companies are making good money. There are profits to be made.
    • Rascal 5 months ago
      So you think this is rally will continue..go right ahead..big companies will be sure to share their profits with you....I need to see housing and job problems improve...no money for people mean little spending..that is what runs this economy!
  • John  •  5 months ago
    Chase the market rally? What a stupid article.
    • Allen 5 months ago
      that's what one gets from CNBC and the affiliated mouthpieces. they never give up the con.
  • Newton  •  5 months ago
    Encouragement to chase a rally eh? Who offers the cattle such a wonderful piece of advice?
  • Work Horse  •  5 months ago
    Never chase. Even more importantly, never chase during a bubble. This article is as stupid as it gets.
  • Popo  •  5 months ago
    ie: "How to lose your shirt"
  • Kibble  •  5 months ago
    France and German taxpayers don't want to bail out Greece. So they will use the IMF supported by the US and other countries to drag us into this mess and throw away our money. Geitner policies of kissing up to the EU Socialists is nothing but a horror show for the taxpayer and a backstop for the "big money" banks.
  • Scott  •  5 months ago
    My gut tells me this "rally" is due to hedge fund managers underperforming benchmarks, and desperately playing catch-up until year end. However, you can't expect QE3, money printing at 12,000 levels. So I'm waiting for the drop back below 1,000 on the S&P, then I go in. This should definitely justify QE3 and then up another big leg through 2012. Being a major doomer (based on real information, not hunch) though I see a major reset in the world markets occuring late 2012 into 2013.
    • Doug 5 months ago
      The BULL is RUNNING,..wait and you'll be late. We have INFLATION,..you NEED to OWN GOOD stocks and Bonds to keep UP,...most people don't want to hear this but Stocks keep up with inflation. BUY good ETF's . JMHO
    • Scott 5 months ago
      I stick by my original statement Doug. Keeping in cash for now, and adding all the silver to my safe that I can.
    • econdude 5 months ago
      Stock prices can go down even with inflation.
  • Anonymous  •  5 months ago
    Geez...Here's a tip: The only way to make money in this illogical, totaly technically driven equity market is to have an inside tip from the big banks or government officials who are manipulating and destroying a previously solid area for the smaller investor to make money long term. How's that for reality????
  • Jim Lentz  •  5 months ago
    Stay out. The DOW will hit below 10,000 by the end of 2012. Lots of news to still come out concerning the past mortgage woes and the Europen situation.
    • anon 5 months ago
      loser #1
    • DG Reid 5 months ago
      Anyone talking 12 months out shouldn't be in the market.
  • Mitchell Pedersen  •  5 months ago
    The market is going to take a big dump soon.
  • Zeon  •  5 months ago
    Chasing stocks is not a good strategy in a volatile market. It's better to buy low and sell high, rather than buying high, which is what you're doing when you chase stocks. Let the market come to you. Unfortunately, most retail investors let their emotions rule and that's why most of them lose money consistently. I've made a lot of money this year buying on major dips and selling on the ensuing rally. It's not perfect but I seldom lose money.
  • CS  •  5 months ago
    This fool says "Identify quality companies, with good earnings growth, good cash flow, and in some cases nice dividends", that are technically "trending higher, not ones that are still in troughs." Why does the media continue to quote idiots like this guy who still believe in charting and other such "technical analysis", that attempt to use the past to predict the future...a fools game and proven to be so by academia. Please... the past is going to help predict the future in our volatile world with Arab uprisings, China currency manipulation, Euro crisis, Herman Cain popularity etc etc.
  • Anonymous  •  5 months ago
    Am I the only person in the world that seems to realize that this whole market rally is completely artificial and manipulated???!!!!!!
  • JeffreyT  •  5 months ago
    Wouldn't let these guys cajole me into buying an overpriced basket of equity positions when the fundamentals and risks are still so bad. Until we find out who will be running the government next November I will be cautious. The dollar could be worthless in 2013, unemployment is high, credit risk is rising, we are buying weapons for the Mexican drug cartels, we give $500 billion to bankrupt solar campaign donors, entitlement spending is growing out of control, our debt has rose to $15 trillion, etc. Not a good sign for the equity markets.
  • John S  •  5 months ago
    Since when is reacting a better strategy than anticipating?
  • fed-up  •  5 months ago
    What a bunch of "doomers and gloomers" we have here. Sit on the sidelines all you want, I will take your share.
  • Boycott Ukraine  •  5 months ago
    Jim Rogers made some glaring misstatements in this segment. He said, "China calls themselves communist but they're among the best capitalists in the world. California is more communist than China."

    What? Jim, you idiot! Communism is politics, Democracy is politics. Capitalism is economics, socialism is economics. China calls themselves communist because, guess what? They don't have free and fair elections, Jim. California does have free and fair elections because they're part of a republic. What Jim meant to say is California is more socialist than China. But China is far from a true capitalist economy. They block foreign investment, and steal patents and copyrights like there's no tomorrow. This is a kleptocracy.
  • Drbuilder  •  5 months ago
    Today we're chasing a rally. Tomorrow the same reporters are quoting the world's "top economic adivsors" who are promising us a double dip recession. Get a clue.

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