When I set out O&G stocks 5.5 months ago I experimented combining Opportunity Stocks (O) with Gold stocks (G) which could potentially cancel each other out as Growth and Gold tend to be inversely correlated but my wager was that over time either one of them would outweigh the other and the combination would provide a net positive return. And to date it has because the G returned handsomely while the O has recovered well lately.
Now I am experimenting with a different set which comprise of a combination of Bear ETF short positions against a portfolio of long positions in stocks that have been overlooked and poised to retrace to the upside , the theory at least is that if the market moves lower from here eventually, the Bear ETFs would offset the declines in the long positions while if the market goes higher the long positions would offset the Bear ETFs. And the hope is that as the market goes lower over time, the market is able to discern which stocks should not follow the decline proportionately in other words the long stocks outperform the indices on the way down and on the way up. Therefore choice of long stocks would need to meet three criteria (a) minimal to no impact from COVID19 and fairly resilient to the recession and (b) has no debt and good cash reserve position and (c) have got a decent upside retracement remaining without making it overvalued. These are not generally found amongst the better classed stocks or Instos favourites but smaller to midcap space. No doubt this space remains a risky proposition but if their business is in a more resilient sector and they have a good history they can survive and prosper ahead. Having such combination could give me the option to close out either the Bear ETFs when market hits the lows again or close out the long once either retracement is complete or the market indices reaching the upper limits of its current rally. The Best of both Worlds play if you like to navigate this crazy market.
It may work it may not but it did with O&G - all it took was a single gem and G was higher overall by 50pc in 6 months.
