BUYING BLUE-CHIP STOCKS THAT HAVE OUTPERFORMED THE BROADER MARKET IS A DIVERSIFICATION STRATEGY THAT’S WORKING $DIA $MSFT $WMT $AAPL $CPB $INTC $DJIA

In the wake of the novel coronavirus, many investors are looking for prudent strategies to buy stocks. Let’s explore this with the help of a chart.

Please click here for a chart of Dow Jones Industrial ETF DIA, which represents popular stock index Dow Jones Industrial Average DJIA.

Note the following:

• The chart compares five stocks with the Dow Jones Industrial Average.

• Investors should consider diversifying by strategy in addition to diversifying by sector, market capitalization, geography, time frame and other characteristics. At The Arora Report we use over 50 strategies for stock selection. Different strategies are appropriate for different times.

• One strategy that is highly applicable now on the stock-market drop due to the coronavirus pandemic is to look at blue-chip stocks that have outperformed the stock market.

• Blue-chips have the advantage of solid balance sheets and well-run, established businesses that aren’t going anywhere soon.

• The chart shows that Microsoft MSFT has done the best among the five stocks and is barely down for the year.

• It may surprise some investors but the next two best-performing stocks are Walmart WMT and Campbell Soup CPB.

• The chart also shows Intel INTC and Apple AAPL beating the stock market.

When and how to buy

The best way to buy is on pullbacks into buy zones. For example, Microsoft recently fell to $132.52 in the Arora buy zone and has now moved up to $160. Our very long-term target for Microsoft is a range of $210 to $220.

What if you do not have the patience and self-discipline to wait for dips into the buy zones? Consider slowly scaling in using small tranches but only if the “buy now” rating of a stock is “yes.”

It is important to be nimble and differentiate between strategic buying and tactical buying. Always buy in the context of the big picture of the stock market, especially support zones. The “mother of support zones” has an 80% probability of holding. For this reason, if the stock market dips in this zone, it will provide an excellent opportunity to buy for the long term. Please click here to see the support zones….Read more at MarketWatch.

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