Profit from Dow 55,000

As I mentioned before, Dow 55,000 isn't a price target for next year or the year after. It's a very long-term target that's based on the runs stocks have made in the last two similar periods to today. But now is absolutely the time to get your portfolio positioned for the upside.

The simplest way to profit from Dow 55,000 is to buy stocks as a group. Major index exchange-traded funds such as the SPDR S&P 500 ETF ( SPY) or the PowerShares QQQ Trust ( QQQ) may not be very sexy, but they give you instant exposure to a diversified equity portfolio with very low fees.

That said, this is very much a stock picker's market. Aside from general stock buying, one of the best ways to play this trend is by honing in on fundamentally solid names that everyone else hates. Heavily shorted stocks have the potential for a short squeeze as sentiment turns, and that's more than just an old wives' tale; my research shows that buying heavily shorted large and mid-cap stocks (the top two quartiles of all shortable stocks by market capitalization) and rebalancing monthly over the last decade would have beaten the S&P 500 by 9.28% each and every year.

That's some material outperformance during a decade when decent returns were very hard to come by.

That makes names such as Garmin ( GRMN), Intuit ( INTU) and even high-flying Chipotle Mexican Grill ( CMG) look pretty attractive in the years ahead.

I'm the first to admit that Dow 55,000 sounds like a crazy price target for stocks right now. But with so many factors lining up to suggest another generational buying opportunity for stocks right now, it'd be just as crazy not to position your portfolio for it in 2013.

-- Written by Jonas Elmerraji in Baltimore.


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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

Follow Jonas on Twitter @JonasElmerraji

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