I see Thomas Cook (LON:TCG) is down 4.8% today. Ouch. TT. (TUI Travel) reported its Q3 results today, in which it reported strong demand across key markets, operating profit up 18%, and was well positioned to deliver on its five year growth roadmap. That sent the shares down 4.9%. It looks like the momentum has had the wind knocked out of its sails for now, and TCG is catching the vibes.
Back to my tip … if you take a look at UK StockChallenge: http://www.stockchallenge.co.uk/ and check out the Stock Entry Details tab for the month, you’ll see that TCG is, overwhelmingly, the most-selected share for August.
Although, admittedly, the number of observations I have made are very small, I have noticed that the topmost selection underperforms. Last month, THT (Thorntons) was a disappointment. THT was down 11.9% – compared to the All-Share, which was up 7.1%. I had also noted some other popular share from a previous month perform badly - but I don’t recall what it was.
So that’s my tip. The most popular share for the month should probably be avoided. That slam-dunk share that everyone thinks must be a winner is likely to be an overcrowded trade. If I owned it, I might think about selling it until the heat died down. TCG has a price to 50dMA of 19.9% – which is around the upper end of what I’d consider my “hold” zone. I’d consider it a sell at around 25%, and I’d want to see a big scaling back before getting in. My method isn’t foolproof by any stretch of the imagination; my sale in SGP (Supergroup) was far too premature, for example.
I’m not saying that you should be a contrarian just because a selection is popular, what I am saying is to avoid the MOST popular share, as everyone who wants to be on board is likely to have bought in.
Happy investing to you all.
