Uncovering the Next Superstar Sector

Uncovering the Next Superstar Sector

The measure of intelligence is the ability to change. – Albert Einstein

Those 9 words ring loud and true in 2023. Right as the crowd was certain stocks were over, a feverish rally was birthed…and it’s not over.

Today we’re uncovering the next superstar sector.

If you want to be a successful investor, be open to change. Challenge conventional wisdom. Most importantly, follow institutional footprints.

We’re in the midst of one of the strongest rallies in recent memory. If you believe Technology is the only game in town, think again.

Money is violently flowing into one hated group: Financials. Yep, the economic bonfire from a few months ago has left fertile soil in the ashes.

History suggests there’s more room to run…much more.

As usual, let’s first take stock of the overall market picture, exploring the ever-changing market landscape.

Big Money Index Remains in an Uptrend

Institutional volumes reveal the underlying trend of the market. We’ve been northbound since October, when the data painted an extremely bullish outlook.

Over the past 9 months, the Big Money Index (BMI) has signaled healthy institutional buying:

Big Money Index (BMI) approaches Overbought Q3 2023 | MAPsignals

Above you’ll see where that rare bullish signal triggered and how it hasn’t abated. As of this morning, we’re edging ever closer to the red line, overbought.

Keep in mind, once the BMI breaches overbought (80%+) we tend to hang up there for 4 weeks on average. In other words, don’t pump the brakes on your stocks just yet.

When you peek under the surface of the BMI, healthy buying abounds. Breadth is incredibly strong:

Strong Breadth since June 2023 | Big Money Stock Buys & Sells | MAPsignals

I’ve shaded the powerful green money flows. It’s broad-based and what you’d expect to see given the S&P 500’s YTD 20% surge.

Inside of those big green bars are individual stocks. Here’s where being open to change can pay off.

Uncovering the Next Superstar Sector

Beginning in July, one group of equities has been under heavy accumulation: Financials. Get this, if we tally all the buy signals month-to-date, Financials represent 20% of all inflows:

Percent Buys per Sector from Universe | July 2023 | MAPsignals

To give you some perspective, of the 1272 discrete buy signals in July, 255 were in the Financials space. That includes regional and money-center banks, insurance, brokers, and more.

Talk about a welcome change from months ago. Back in March, we noted how the capitulation in the Financials group was heavily responsible for the decline in our data.

Fast-forward 4 months and the tables have turned. The buying seen this week alone jumps off the chart:

Heavy Institutional Buying in July 2023 | Financials Buys & Sells vs XLF | MAPsignals

Uncovering the next superstar sector will undoubtably involve smart institutional investors. That’s exactly what the data shows.

Yesterday alone saw 67 Financial equities under accumulation. That’s super rare and represents 33% of our 200 financial stock universe.

I went back and isolated all instances of similar buying. Back to 2013, there’ve been ONLY 18 days where roughly a third of our Financials sector were scooped up.

Here’s where data shines and why I believe this area can keep thriving. Incredibly, 1 – 12 months post this rare event, the Financial Select Sector SPDR Fund (XLF) offers handsome returns.

XLF jumps 9.1% 3-months after such a buying spree. Wait a year and the forward average ramps to 28.9% with a 100% positive hit rate!

large sector selling study as of 2023 | MAPsignals

Ladies and gentlemen, this is the beauty of data. It cuts through the noise and offers a different narrative.

Suggesting that Financials is a great place to make a bet isn’t going to win me a popularity contest. I get that. But the evidence is powerful.

Be open to change. Invite new ideas and don’t fight the Big Money!

Pro subscribers, be on the lookout for a special 5-stock update soon.

Let’s wrap up.

Here’s the bottom line: Uncovering the next superstar sector is likely grounded in data. The Achilles heel of the market, Financial stocks, are attracting monster inflows.

Over the past 10 years, this rare signal prefaces a mega rally in XLF 12-months later, with nearly a 30% gain. You can only imagine what single stocks will do alongside that tailwind.

MAPsignals ranks the top scoring names every day, isolating the outliers in every sector. Odds are tomorrow’s winners are well-known by the institutional community today.

You don’t need to be an Einstein to make money in stocks – just embrace change.

If you’re a professional money manager or are serious about investing, let MAPsignals unique data take your game to the next level. Don’t fight change, embrace it with a MAP!

Have a great week everyone!