If you tuned into the daily IBD Live stream Tuesday, you saw the Team discuss many top stocks to buy and watch. UnitedHealth (UNH), Costco Wholesale (COST) and Tesla (TSLA) were all on the move in the stock market today and are also members of IBD Leaderboard.
Tuesday’s full IBD Live show is now available for subscribers.
During the livestream, an IBD Live viewer asked the Team an important question. Why does Leaderboard have more than 20 positions? Isn’t the strategy to invest in only 8 to 12 stocks maximum at a time?
IBD’s Chief Content Officer Chris Gessel explained in detail why IBD has gone down this road of having more stocks on Leaderboard than in previous years. The Team also discusses why investors should consider doing the same.
IBD Leaderboard Adds More Stocks
Many IBD investors have gotten into the habit of selling off half of an initial stock position as a major earnings event approaches. Rather than hold idle cash, half-position selling often results in other new positions added in their place. Thus, you may have noticed an increasing number of total positions on IBD Leaderboard.
Back in Q1 of 2019, several high-priced, high-profile leading stocks on Leaderboard failed badly soon after strong breakouts, due to unexpected earnings report misses. “Due to how the market was acting, it became very difficult to have a concentrated portfolio. All these major stocks were having problems early on in their breakouts due to (missed) earnings,” Gessel said.
“That made us more cautions about holding full positions into earnings and that’s why we’ve gotten to this point.”
IBD Head Market Strategist Mike Webster chimed in on how a diversified strategy also allows investors to feel comfortable when holding more volatile stocks. “Personally, I’m spreading myself out more than I ever have in my whole career and it’s allowing me to sleep at night — even though I’m trading some crazy, volatile stocks right now.”
Ultimately, portfolio organization is personal. The IBD Live Team noted that portfolio concentration can still work for skilled traders. “If you want to be orthodox, pick five to eight stocks to buy from the current Leaderboard list,” Webster said. “Bill (O’Neil, founder of Investors Business Daily) has always concentrated his portfolio. He would boil it down to maybe three or four stocks, then eventually one or two.”
IBD Live Leaderboard Breakout: Costco Stock
Three breakouts to buy and watch during Tuesday’s IBD Live were Costco stock, UnitedHealth stock and Tesla stock.
Costco stock broke out nearly 3% higher on Tuesday above a 307.30 flat-base buy point in heavy volume. After the breakout, Costco stock was raised to a full position on Leaderboard. Shares of Costco stock are now actionable inside the 5% buy zone. The IBD Live Team cautioned investors of the lagging RS line but stated that overall, Costco stock looks strong.
“What’s bad about it? The relative strength line. What’s great about it is it’s a slow pokey stock. So if you’re trading something more volatile, you want something like Costco stock to balance you out,” said Mike Webster.
IBD Live: UnitedHealth Stock Actionable, Tesla Stock On Fire
After breaking out past the 268.79 buy point last December, UnitedHealth stock remains a classic Long Term Leader on Leaderboard. Shares of UnitedHealth stock are nearly extended past the 5% buy zone which tops out just above the stock’s closing price on Tuesday of 300.53. However the 300 price level itself offers an alternative entry.
“After breaking through the 300 price level, a psychological price level, I think it’s totally actionable right here,” said Mike Webster. “UnitedHealth stock’s most recent earnings are behind us now, which takes a huge risk of the table. Also, you have many potential exit points that are close by so you’re not taking a huge amount of risk.”
Tesla stock surged 7.2% on Tuesday to 547.20, hitting a fresh all-time high. That’s quite a move from IBD’s original 361.30 buy point. Shares of Tesla reached the 20% profit taking zone within just three weeks of the initial breakout back in December. The position remains a half position on Leaderboard. Given that shares are well extended from the breakout, the IBD Live Team agrees that Tesla stock is no longer actionable at these levels.
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