Jordan Kimmel shot a quick video outlining some famous stock marketisms. Every trader has heard the old saying “sell in May and go away” but where did that come from? Well, New York traders that controlled the market used to take summer vacations and head out to The Hamptons so nothing much happened over that time period.
These days we’re hearing a lot of analysts and managers claiming that large cap companies will begin outperforming small caps. Small caps have been outperforming large for some while now since the bottom. The primary thrust of this argument is a “reversion to the mean” thought process where historically small caps do not have such extreme performance spreads for such a long time over large cap companies.
Kimmel staunchly disagrees with the thesis that an investor should buy something simply because it has done poorly and likewise sell what has done well. This is precisely the opposite of what Kimmel does when running his portfolio.
Kimmel will wait. If the large cap stocks begin to perform well, they will show up on his proprietary Magnet Stock Selection Process and then he will consider buying them. But, the reversion to the mean argument can be, without strengthening in underlying fundamentals and supporting price action, hazardous logic for the investor.
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