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Epicenter Intro

Covid must hurt stocks

Thomas J. Lee

Head of Global Portfolio Strategy & Asset Allocation

Lee

Former J.P. Morgan Chief Equity Strategist from 2007 to 2014. Top-ranked analyst by Institutional Investor every year since 1998.

Epicenter Stocks

‘Epicenter’ stocks is a term coined by our Head of Research, Tom Lee, to refer to those equities whose means of generating earnings were most directly and acutely affected by the COVID-19 pandemic. These stocks like travel and leisure names, casino stocks, airline stocks, and many other industries were very adversely affected and, in some cases, had revenues drop to virtually nothing due to the interruptions and lockdowns associated with the pandemic. We typically consider the Energy, Consumer Discretionary, Financials, Basic Materials, and Industrials sectors to be the “Epicenter” sectors.

The response to every significant recession is different. In the wake of the collapse of internet stocks around the turn of the millennium, you made money by avoiding everything with a .com at the end of its name. After the financial crisis, you made money by piling into some of the worst affected names and assets as they recovered to more normal valuations. This crisis was, in some ways, the most significant commercial interruption ever. Never before has there been coordinated economic shutdowns.

In short, Epicenter stocks are companies that were closest to the economic and social consequences of COVID-19 but that still survived. Many companies on our lists have come out better and stronger than before the pandemic. Companies were forced to slash costs and adapt to the unprecedented shock the economy faced. As a result, lean and mean companies in Epicenter sectors with high operating leverage and the capacity for upside surprise remain what we see as the best risk-adjusted opportunity in the stock market today.

Trifecta

Epicenter Trifecta

Revised Periodically

These are stocks which were at the "epicenter" of the destruction wrought by the COVID-19 Pandemic and have the greatest operating leverage to take advantage of the reopening

How To Use Epicenter Trifecta

  • Overweight approval (OW) from the "Trifecta" of three factors: (i) Quantitative models, (ii) Global strategy and (iii) Technical strategy.
  • A name will remain on the list if it still has at least 2 OWs out of the 3 factors.
  • A name will be removed from the list if it drops down to only 1 OW out of the 3 factors.
  • Power Epicenter: provides investors with a consolidated list of Epicenter stocks filtered for the names that are poised to strongly outperform the index

Power Epicenter

FSInsight serves a wide variety of clients, from the world’s largest banks and hedge funds to small retail investors investing their stimulus check in the market for the first time. Therefore, our comprehensive Epicenter list can be overwhelming, and you may not have the time to go through and decide which stocks best meet your individual goals and risk tolerances. If you’re looking for a quick list of Epicenter stocks with bullish momentum, our consolidated Epicenter stock list might be your ideal product. We use the standard Epicenter selection criteria and enhance with additional momentum and technical screens to identify stocks that we feel have a high chance of moving higher based on recent trends in price action. This list is updated periodically, and the number of total stocks on the list may fluctuate due to changing market conditions. This list is a great place to find stocks that have ‘hot technicals.’

    • Goal

      We provide investors a consolidated list of Epicenter stocks filtered for the names we feel have the highest chances of outperformance.

    • How to

      Add a few of these names that speak to you. These stocks’ technicals suggest they will outperform the market over the coming months.

    • Timeframe

      The Epicenter Trifecta list is adjusted every month.

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