Beating The Market: A Case Study

Is it possible for retail investors, who lack the time and resources of mutual fund and investment bank analysts, to beat the market? Yes, with a little help from TipRanks’ Smart Investor service, which has already demonstrated its effectiveness by delivering more than double the returns of the market.    

Is it Possible to Beat the Market?

Investing for the long term can be challenging on many levels. As many investors have noticed by now, successful long-term trades are those that were made following a more or less accurate prediction. When a company makes headlines after the fact – such as great earnings delivery, business expansion, or other performance-related event – it is often too late to enjoy the benefits as its price has become too high, diminishing its potential upside.

On the other hand, companies outside of the largest-capitalization cohort rarely draw strong analyst attention, which could be conveyed to the general public before something important happens. Thus, gaining information “before the market” can require significant effort and a vast amount of time. In addition, analyzing the information on a deep enough level to be able to predict the next winning investment can be an arduous task.

In simple words, you have to know what information to look for amidst a vast sea of data. You must also know how to decipher the information you’ve found, applying it to a stock’s return potential. You have to move fast, too, because many analysts and investors are looking for the next winning stock. So, how can a retail investor hope to succeed?     

Smart Investors Gain the Edge

We at TipRanks know that successful stock analysis is a full-time job. However, it doesn’t mean that investors who don’t have enough time or other resources should be left out. We have created and made available multiple tools helping everyday investors gain professional-level knowledge.

One of these tools is the Smart Investor Newsletter. The newsletter gives its subscribers access to the Smart Investor Model Portfolio – a conservative, diversified portfolio of 25-35 stocks for the medium- to long-term (12+ months) investment period. Subscribers can replicate the Model Portfolio as is or choose those of its holdings that fit their investor profile and goals. Since its creation, the Portfolio has been highly successful, delivering more than double the returns of the S&P 500 (SPX).

The Smart Investor Portfolio is actively managed – meaning that we constantly follow news and updates on each holding, making the necessary alterations on a weekly basis. In addition to the current stocks on the list, investors receive timely updates about these changes – as well as a weekly “Buy” recommendation of a new stock added to the Portfolio.    

Case Study: Texas Pacific Land Corp.

One such recommendation, sent to the Smart Investor subscribers on June 5^th, 2024, was Texas Pacific Land Corporation (TPL). The stock was added to the Portfolio two days before the S&P Dow Jones Indices announced its future addition to the S&P MidCap 400 index.

Texas Pacific Land Corporation is a real estate operating company, headquartered in Dallas, Texas. With almost 870,000 acres in the Permian Basin – which dominates U.S. shale activity due to attractive drilling economics combined with a massively undeveloped inventory of wells – TPL is one of the largest landowners in Texas. TPL boasts enviable financial health with zero debt, an unbeatable margin profile, and best-in-class profitability metrics.

TPL has a very efficient and high-margin business profile, allowing it to generate revenue throughout the oil and gas development value chain – from infrastructure construction to production – with no costs associated with the development of these resources. It has royalty, as well as water and surface rights. In other words, it earns its revenues from any activities occurring below or on the surface of the land it owns, such as oil and gas drilling and production, pipeline construction and usage, water supply, waste disposal, alternative energy facilities, etc.

Despite all these positives, the stock had flown under investor radar prior to the announcement about its addition to the S&P 400 index. This allowed the Smart Investor subscribers to gain exposure to this Permian landlord when it was still undervalued – days before the newfound fame brought with it large investor inflows, jolting up the valuations. Since its addition to the Portfolio two and a half months ago, the stock has surged by almost 45%, recently reaching an all-time high.

Conclusion: Knowledge Is Power

The more you know, the better decisions you can make. TipRanks has the tools to help investors identify promising stocks to buy. The Smart Investor portfolio has a track record of success in doing so.