Apple Outperforms The Nasdaq, Or Why I Prefer Stocks To The Indices

I started investing back in 2007. Before that, I was day trading, and let's just say the quicker you give up that habit, the better. 

When I came across trend-following on the higher timeframes, my mindset and approach completely changed, and I have never looked back. 

I learned the indices are an average of a group of stocks. If you invest in the average, you get average results. The average will indeed outperform, say, the insulting returns of the banking system.

Still, logic should prevail that if the indices are an average, then some stocks will be doing better than the average, and those are the ones you want in your portfolio. 

I have a two-step process for finding these top-performing stocks. 

Start with professional scanners to create an initial shortlist of the best stocks based on my criteria.

Switch to bespoke charting tools to analyze the scan results to create a final shortlist of the very best stocks that make it into my portfolio. 

Apple AAPL is one of those stocks. Let's do some analysis. 

The Monthly Timeframe

Starting with the Nasdaq 100, price has moved circa 148% since the low of March 2020 following the recovery from COVID-19.

In comparison, Apple has moved a whopping 229% in that same time.

The Daily Timeframe

Again starting with the Nasdaq, the recent declines since the high of November saw price fall by 7.2%. Price has recovered by 5.5% but has yet to break out and print new ATHs.

In comparison, Apple declined by only 5.6% in the same period but has recovered by 11% and is already printing new ATHs. 

Spreading risk across strong stocks that outperform the indices has two benefits.

  • Declines are easier to manage. 
  • Recovery is quicker.

Ultimately, this results in more profit even though the indices are still recovering. A stock like Apple can be trending and printing new ATHs for a lengthy period whilst the indices are still recovering or in consolidation. 

The art, of course, is looking for these stocks, and the best way to do that is through the process I have highlighted above. Using scanners and charts removes all the noise and clutter on our media channels and forces you to focus on the charts. 

Price is and always will be the source of truth. 

Posted In: Long IdeasEducationFuturesOpinionMarketsTrading IdeasGeneralindicesstocks