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Published: Jul 27, 2020 7 min read

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Kiersten Essenpreis for Money

If you were the kickball team captain on the playground, you tried to pick the teammates who would help you win. If you’re an investor in the stock market, the strategy might have followed you into adulthood.

“Whether it's a hedge fund or new-to-market Robinhood traders, there’s a cult of trying to pick the winners,” says Ryan Giannotto, director of research at GraniteShares.

But he implements a different strategy: eliminate the losers. There are winners and losers across all sectors of the economy, and if you’re an index-fund investor, you’ll have both in your portfolio.

But for those who want to get a bit more specific in their stock picking, you might need to identify which companies are adapting to disruption, and which aren’t. After all, it’s much easier to figure out what holds a company back than it is to figure out if a company has a “secret sauce” that will make it successful, Giannotto says. And there’s a small number of stocks (e.g., Apple, Microsoft, Alphabet, Amazon.com and Facebook) that are carrying the market — you don’t want to exclude any of them.

“If you miss one of the winners, you’ve already lost,” Giannotto says. “It’s never been harder to try to pick winners because there are so few.”