Here’s what’s left to buy as stocks hit record highs: Tom Lee

As stocks continue to flirt with record highs, Wall Street's biggest bull has a clear message for investors: keep buying. And he has six lagging groups that are prime for profits.

According to Fundstrat's Tom Lee, 2017 is likely to be a very good year for laggards of the S&P 500 index. In recent coverage, he highlighted oil and gas drillers, metal and glass containers, fertilizers and agricultural chemicals, IT consulting, tanker stocks, and metals and mining.

"We looked at close to 80 years of the performance of 164 industries," Lee said Friday on CNBC's "Trading Nation."

"When a group severely lags, by at least 2,500 basis points or more, you almost always make money buying these things."

Since 1927, Lee explained that buying laggards has resulted in a five-year cumulative outperformance of 2,060 basis points when fewer industries lag amid a broad market, as is currently the case. The group of six appear to be inflecting fundamentally, which is also a positive development.

"Since 1977, a flattening of the long-term yield curve sees equities weak over the next six months," Lee said in his coverage published Friday. "But given the potential for a large rotation into stocks, equities could rally throughout" the first half of 2017.

From here, he believes that there are also fundamental reasons that point to success for some of these groups.

"Of the six groups, three have the most 'surprise to blast away' potential," noted Lee. "Drillers, tankers, and metals and glass containers" because of rising rig counts, an industrial recession coming to an end and day rates outperforming stocks, respectively.

Within these groups, Lee concluded that Helmerich & Payne, Mosaic, Silgan Holdings, Star Bulk Carriers and Atwood Oceanics are names where he has especially strong conviction.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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