Investing rules are made to be broken. It's not that we want to be rebels for the sake of disagreeing with the big shots on Wall Street, but when the market changes, we have to change with it.
We've all heard about the two most popular investing strategies: growth and value investing. Growth stocks, with their potential for revenue increases, offer investors the chance at huge gains as these hyped-up companies soar. Then there are value stocks, which are trading for less than what they're really worth. When the market catches up, their share prices can surge.
But now, new research shows that both of these groups actually cheat investors out of returns in the current market. A third, less hyped-up strategy is beating both value and growth investing.
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Quality stocks, regardless of other classification, are the stocks with upside momentum, and they are leading this market right now. Quality stocks are in companies with high return on equity, stable earnings growth, and low debt. This might not sound like the most exciting group of stocks, but they are actually the biggest winners.
New research shows that high-quality stocks are now most closely tracking the momentum stocks that typically lead the market higher.
Take a look at this chart showing just how closely quality stocks track with momentum.
While you might expect growth stocks to lead the way, quality stocks' dominance makes sense.
Investors are quick to sell lower-quality shares in times of turmoil. And with the China trade deal on-again and off-again, we've had plenty of that.
This relationship began before the tariff battle began, too. In fact, the trend toward investing in quality began in 2018, when the market first peaked and then settled into the choppiness we saw most of the year.
That's not really a surprise. Investors feel safer with companies that show strong financial results coupled with a low debt load.
With another sell-off underway as investors look for safer assets like bonds, we expect to see quality stocks continue their market leadership.
And that's why we're going to show you the best one to buy today.
This company's sterling balance sheet checks all the boxes for making it the perfect quality stock.
Plus, it has a top Money Morning Stock VQScore™, placing it squarely in the "Buy Zone."
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Our pick today is a blue-chip semiconductor stock with solid fundamentals and the potential for big gains once things calm down on the trade front.
Texas Instruments Inc. (NYSE: TXN) is a global semiconductor design and manufacturing company. You might know the name from its calculators, but it offers products from analog integrated circuits to embedded processors. It's one of the oldest technology companies in the world and is a champion of dividend growth. It currently yields 2.97% and has raised dividends 20% annually over the past five years.
That is a sure sign of a healthy company with confidence by management.
The stock also has a reasonable valuation in the market with strong cash flow and steady increases in net income - up 3.17x over the past seven years.
For those looking a bit deeper into the fundamentals, the company offers a return on equity of 57% and a low debt-to-equity ratio of 0.68. You're lucky to find a company returning more than 20% on equity, and a debt-to-equity ratio below 1 is pristine. With quality stocks leading the market right now, you might not find a better one to buy.
And we can confirm it with our VQScore. TXN boasts a 4.45 VQScore, meaning it's primed to break out higher.
If you believe, as we do, that the current tariff situation with China will not significantly ding the U.S. economy, then the current dip in the market, and in semiconductors in particular, actually provides a good opportunity to buy great stocks at better prices.
Not only will the trade war eventually end, but new tech trends - like 5G wireless - should provide a massive new catalyst for semiconductor firms. And the better quality the company, the better its stock should perform.
And if you haven't heard just how revolutionary 5G will be, make sure you take a look at our research. We've pinpointed the one stock to own ahead of this massive new tech catalyst...
CNBC reports that this opportunity is worth $12.3 trillion... and it's gearing up to make an appearance all over America.
In fact, some of these devices are showing up right in your neighborhood - and I'm willing to bet you didn't even notice.
Our Silicon Valley insider mapped out all the details in this report.
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