IBD put my strategies in a nicely organized article today: (please save)
Above all else, what one factor is most likely to tip off a huge price advance in a small-cap stock? Earnings acceleration.
Quickening profit growth stands out as the best single predictor of a blowout price move. Learn to spot accelerating earings, and you've taken a key step toward finding the next big winner.
"One of the most successful attributes of successful stocks has to do with companies that are undergoing positive change in their FUNDAMENTALS," siad Gary Pilgrim who runs the $5 billion PBHG Growth fund Growth Fund. "The idea is to catch...a company when it is emerging from one rate of growth and transitioning to a higher rate of growth. That's our view of the highest potential stock to own.
The "flight to quality" which favored huge, established companies over smaller firms -- is showing signs of waning. ...Earnings growth, which slackened at large-cap companies in 1997, is expected to slow even more in 1998.
The article goes on to discuss how to spot high acceleration which is what I do when I mention velocity, projected velocity, acceleration, and correlation cooefficient. I do just that. I can spot the top 2% of companies out of an 9,000 data base.. So that's fine but then what next? Well then comes TECHNICAL ANALYSIS.. You don't want to go into these companies when they are in the midst of a correction or after a huge run. So again it is the integration of earnings date*, fundamental analysis and technical analysis that will portend the best rising stocks.
Only difference is that I'm in it for the 'pop' and not the extended holds. Because unfortunately on the flip side, it is these fantastic growth stocks that can and do retreat 20-30% after a particularly long run or earnings disappointment and you should be out by that time.
So, threaders, you must be as cognizant of fundamental analysis and not quick to dismiss stocks whose charts are not classically what you would call 'great'.. I've had 4 stocks alone first week in March that have given great gains with less than spectacular charts. Remember TECHNICAL ANALYSIS is not an exact science if stocks trended according to TA charts, everyone would be getting rich and TradeStation would be another Microsoft. It is with the combination of FUNDAMENTAL and TECHNICAL analysis that you will hold the edge and leave all the traders in the dust.
*(around earnings date because it then that the long awaited "great" quarter will give you the best price movement)
jenna
marketgems.com |
