The final stretch of 2018 was a rough, and many investors are still making sense of their current investments. Once you work through your current holdings for the positions you feel have "made the cut," it's time to ask the question: where should you invest for 2019?
First, consider the type of investor you are. Do you like to buy countertrend plays in sectors or on stocks that have fallen sharply? You may be the type of investor that likes to buy only strong stocks in strong sectors that are possibly already in an uptrend. No matter your style, we'll dissect the current market so you might find your picks for 2019.
If you like buying the dips, you'll certainly want to look at the technology sector. The technology sector was by far the weakest for 2018, with losses nearing 30%. Small- to mid-cap tech stocks have been the most vulnerable area of the sector, as about 50% of sector losses come from those names. Drilling down a little more, you'll see that software stocks that were hit the most. Semiconductors are also trading at a recent discount, as they spent this year trying to analyze the impacts of tariffs and potential oversupply. While many think the supply issues are already priced into the semiconductors, a resolution to the trade war with China could help pull these stocks off their bottoms in 2019.
If catching a falling steak knife is not your style, then maybe you'd like stronger areas for your 2019 picks. Healthcare stocks would be the place to focus. As of the new year, healthcare is clinging to 2018's small overall gain. Many feel that with divided control of Congress, there will be little in the way of actual health care reform, leaving room for this sector to continue to grow. In addition, the recent selloff leaves many of these names in a position to buy the dip on a relative strength basis. Biotech and the healthcare plan subsectors have been relatively strong areas lately.
No matter your investment style, there's no doubt that the end-of -year selloff has created plenty of opportunities for discount investors - but strength investors also have a chance to build a portfolio of their best picks for 2019. Happy New Year!