Consumer Stocks Now See Big Money Buying

Thomas Edison may have been a murderer. Or so some speculated. Edison was a prolific inventor and also a fierce competitor. Many of his inventions are purported to be taken from others. Nikola Tesla and Edison famously fell out, and it is thought Edison appropriated Tesla’s work.

For example, Edison claimed being the sole inventor of the light bulb, which was the technological prize of the time. Yet, historians say he borrowed and even stole ideas from other inventors. He wanted to be sole patent owner for many innovations, and he relentlessly promoted his self-image this way.

He was also in a race to become the first inventor of cinematography. However, in October 1888, French inventor Louie Le Prince recorded the first set of moving images. Edison wanted the patents for himself and was frantically trying to secure them. On Sept. 16, 1890, Le Prince left his brother in Dijon on a train bound for Paris. He nor his belongings ever arrived. He simply vanished, never to be seen again.

It was convenient for Edison’s road-block to suddenly evaporate. Conspiracy theories percolated. Was Edison a murderer? That may be far fetched, but either way, through a series of court battles, Edison eventually won. He refiled patents allowing him to dominate the film industry for years. 

That seemed to be the end of that – until 118 years later. Historian Alexis Bedford was digging through papers on Edison’s lighting work. In them, he saw a leather notebook. Edison used these for ideas and data. Deep inside, Bedford saw an entry dated Sept. 20, 1890. Thomas Edison’s handwriting said: “Eric called me today from Dijon. It has been done. Prince is no more. This is good news, but I flinched when he told me. Murder is not my thing. I’m an inventor and my inventions for moving images can now move forward.”

History tends to get whitewashed. Today, few know about this potential bombshell or Edison’s fierce “win at all costs” demeanor. For most, he’s the guy who invented the light bulb. But he made the equivalent of billions potentially off of the work of others.

Perception becomes reality, regardless of actual reality. So it is in stocks too. 

If I’m asked, “Why is this stock up so much?” – people need a reason. They want to hear things like, “The company will own a developing nation’s communications network!” or “A working cloud-based technology is the future, and this company is poised for greatness.”

They won’t want the truth. The answer I should give is frustrating: “Stocks rise because someone is buying.” But there’s never a shortage of reasons. It is against human nature to accept that there may not be an observable reason for prices to do what they do. 

The real answer lies in big money. The true mover of stocks going up and down is simple: money is either moving in or out. That’s it.

The real answer lies in big money. The true mover of stocks going up and down is simple: money is either moving in or out. That’s it.

But I focus on big money investors. These are big firms like pension funds, asset managers, and hedge funds. They have the power to buy or sell more stock than there is liquidity for. When that’s the setup, they have two basic choices:

  1. They can go full steam ahead like a bull in a china shop. This means buying whatever shares are available and making a huge impact on price and volume. The obvious drawback here is that they are competing against themselves. Once the market knows that there’s a big buyer, other buyers leap in to buy shares too. By not being discrete, the big buyer has ruined his or her own picture.
  2. Choice two is for a big buyer to operate quietly under the radar for as long as possible without tipping its hand. This is mostly what big money does. Big buyers want to wait until the bulk of their order is complete to then let the cat out of the bag. Maybe a press release or required SEC filing of ownership gets out. Once the big buyer owns shares, everyone else rushes in to be the next owners in line. This of course pushes prices in the original buyer’s favor.

Which would you rather do? The answer is obvious. This is why I devoted decades of my life devising a system to track big money flows before knowledge becomes public. It’s crucial to be able to buy right when big money likely starts but is trying to keep it quiet. When big money does this on the best quality stocks, this is when I believe I have the best odds of making money in stocks.

Big money also tends to move in herds. This is why I look at which sectors collect or lose capital. These rotations help us identify which sectors lead and lag, and therefore we can track down when big money pours into the best stocks of the leading sector. It’s all about putting the odds in your favor.

This past week, we continue to see technology and health care take a pause in leadership. The sectors collecting money last week were discretionary and staples stocks. Health care and saw roughly the same amount of buying and selling. That’s nowhere near the frothy buying levels we saw in prior months.

Source : Investopedia