Junk Stocks Stage Historic Rally

By on August 9, 2009

Dan Ferris points out that junk stocks (stocks below $5) have outperformed stocks above $50 (regarded as higher-quality stocks) by 90.9% since March; more than they have in any speculative rally, according to Jeremy Grantham. Ferris compares the stock price performance of Diedrich Coffee (stunning) with Procter and Gamble (woeful).

Ferris and Grantham conclude the only odds-on bet left in the stock market right now is to buy quality and avoid junk.

SMA Comment: Consumer staples stocks have been especially poor relative performers over the past 5 months, however, they dropped much less in the bear market, so over a year they are probably about equal with everything else.


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