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Chart Breakout – Stocks to Build a Portfolio

April 26, 2024

Based on this chart, where each candlestick represents a month, we can see that the shorter blue moving average has turned down and may cross below the red moving average (a dead cross). History suggests that all periods of weakness in US stock markets end up as buying opportunities but we don’t know how much weakness lies in the immediate future.

Nevertheless, I am finding shares that look worthy constituents of a 3G-based growth stock portfolio. For simplicity, I will show the charts below and discuss them further in the strategy section.

Share Recommendations

Badger Meter. BMI. Buy @ $183.50

AZZ Inc. AZZ. Buy @ $71

Alarum Technologies. ALAR. Buy @ $29

Vertiv. VRT. Buy @ $92

Westinghouse Airbrake Technologies. WAB. Buy @ $163

Watsco. WSO. Buy @ $444

Strategy – New Stocks for a New Bull Market

I was shaken by my catastrophic experience with ICZoom. Even by my roller-coaster standards that was apocalyptic. It was also embarrassing to land IG with such a loss. Live by the sword as the saying goes.

I have reverted to an older portfolio approach which has served me well in the past. In 2010 at one stage I was up 10-fold doing this so it can certainly produce satisfactory results. I am especially hopeful this time because I have some new tools for finding exciting shares which I apply every day with good results if we regard ICZoom as an outlier.

I already hold 14 shares in my portfolio having been 100pc in cash a week ago. I was also holding both Vertiv and Alphabet ahead of results that moved their shares sharply higher. You can see that I believe my new strategy has great promise.

I am so trigger-happy that I have already sold three shares, repurchased two of them and realised that there was no need to sell the third so I am still on a learning curve.

My plan is to feed you with names as I find them and feel confident that they are the real deal. I don’t always jump in straight away. There are six names above which are all in my portfolio. I am not front-running. As I get more organised I will keep you posted when I become bullish on a share. The beauty of emailed alerts is that it is so easy to do that.

How the Strategy Works

My initial aim is to build a portfolio with 100 constituents. I invest equal amounts in each share and add to my holdings if they perform well/ deliver good news. I have already added to my holdings in Vertiv and Alphabet. I will also jettison shares which look as though they are not going to deliver but shares in strong uptrends tend to be volatile.

My strategy of adding to the top performers means that underperformers naturally become less important over time. I am doing all of this in a spread betting account to avoid tax but I am using DFBs (daily funded bets) because I no longer expect to hold shares long-term.

One exit strategy I am considering is whenever I think that I am doing amazingly well I will sell everything, bank the cash, have a slap-up meal in a restaurant and start again.

All Portfolio Shares Must be 3G at a Minimum

As well as great charts all the shares above have great growth and great stories. They must have or their shares could not do so well.

Badger Meter makes an increasingly sophisticated and widely used kit to collect data in the water industry with a global network.

AZZ delivers metal coating solutions. It may sound a bit old school but it is a great business heavily involved with the infrastructure build-out, which is so needed in the modern world. The shares dived yesterday because of a fundraising, which is a temporary negative.

Alarum Technologies has a subsidiary called NetNut, which is growing explosively.

The solutions by NetNut are based on our fast, most advanced and secured hybrid proxy network, enabling our customers to collect data anonymously at any scale from any public sources over the web. Our network comprises both exit points based on our proprietary reflection technology and hundreds of servers located at our ISP partners around the world. The infrastructure is optimally designed to guarantee the privacy, quality, stability, and the speed of the service.

Alarum Technologies website

Vertiv is an AI play, with similarities to Super Micro Computer. It is not growing as fast as Super Micro but the growth rate is accelerating and the latest quarterly results and accompanying statement were very positive.

Our performance continues to strengthen. Demand is clearly accelerating, and we’re well positioned to capture the growth and deliver — and to deliver great returns for our investors. We demonstrated the flexibility of our capital deployment strategy, initiating an opportunistic share repurchase in the first quarter, and our current cash flow generation profile provides wonderful opportunity.

Dave Cote, CEO, Vertiv, Q1 2024, 24 April 2024

Westinghouse Airbrake Technologies (WabTec Corporation) describes itself as follows:

As the world’s foremost rail technology company, we will lead the way in creating a more sustainable freight and passenger transportation network. Our values are based on safety, innovation for customers, operational excellence, and teamwork.

Wabtec operates under two financial reporting segments: Freight segment, which includes Equipment, Components, Services and Digital Intelligence; and the Transit segment, which includes Equipment and Aftermarket Services.

Wabtec website

Watsco is the largest distributor of air conditioning, heating and refrigeration products in the Americas. Acquisitions play a role in their growth.

Since the beginning of last year, we expanded our network through acquisition with three terrific businesses joining the Watsco family. Collectively, their aggregate sales are approximately $200m per year and more importantly, they expand Watsco’s reach into new markets. These businesses will retain their culture, their leadership, and teams and uniqueness in the market, which is consistent with our long-term practice of sustaining great legacy and investing to drive additional growth.

Our industry remains highly fragmented, and we will continue to pursue other great companies to grow scale in our $64bn North American market. Watsco’s technology advantage, industry-leading scale, equity culture and the strength of our balance sheet are all great reasons to join the Watsco family.

And finally, before getting into Q&A, as always, I want to emphasize that our focus remains on the long term. Our balance sheet is strong, and we stand ready to invest in the right growth opportunity. We have an immense technology advantage, and we are investing to grow that advantage. Watsco’s broad array of products and brands is also a competitive advantage that allows us to serve contractors in most any environment. And we are also fortunate to operate in an industry that benefits from regulation changes and fundamental catalysts that will play out in the years ahead.

Al Nahmad, CEO, Watsco, Q1 2024, 24 April 2024

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