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Less Speculative Stocks Are Showing Signs of Outperformance (NVR, HOC, WMT, ANN, HCBK, BAC)

|Includes:ANN, BAC, HCBK, HFC, NVR, Wal-Mart Stores, Inc. (WMT)

    Since the bottom in March 2009, some stocks have seen tremendous outperformance. I referred to it as the sling shot phenomenon in a previous post: the harder a stock has fallen, the bigger its rebound.   (seekingalpha.com/instablog/48158-stephen...;  The biggest winners were often the most speculative ones, companies whose survival appeared very much in doubt.  They frequently had weak margins, profits, and balance sheets.  In contrast, the seemingly stronger players lagged.  As we enter 2010, this pattern is starting to break down.
     Compare the pairs below.  For years,  NVR, WMT, and HCBK clobbered the paired HOV, ANN, and BAC.  HOV, ANN, and BAC were trounced so badly that they all traded under $3 in the early part of the year. In March, they came back from the dead and left NVR, WMT, and HCBK in the dust.  We've only recently resumed the older pattern in which the stronger of the pairs outdistanced the weaker, something that will likely continue into 2010.  If you follow the "green" line, it as though HOV, ANN, and BAC's spectacular outperformance never happened. 

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Disclosure: No positions

Stocks: WMT, ANN, HCBK, BAC, NVR, HFC