PowerfulStockTips.com

What is it? Not researching a company before you invest in it.

What Makes me Think you Might Do It? Having a good understanding of a stock’s current value is important.  Many people invest due to the hype surrounding a company. Without company research, you won’t know if the stock price was inflated. For example, did the company’s stock rise simply due to a press release of projected revenue numbers for the coming year, or due to a completed buyout of another company? You can see how the buyout news is a more solid reason that the stock should go up, as mere price projections can change at anytime, and for many reasons.

How to Dodge that Bullet: In a sentence: You must do company research to succeed. A company needs to be fundamentally strong in order to support a rising stock price.

When investing, you should believe that the business is worth more than it’s stock price suggests. After all, you’re part owner if you’ve bought shares. You want the business to do well, and the stock to follow. That’s how you profit, right?

For more information on Trading Mistakes, check out all of the top trading mistakes I revealed here >>

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No, no…I’m not talking about Technical Analysis bullish/bearish trends. In that instance, the trend is still your friend!

What is it? Following the investing crowd on every trade.

What Makes me Think you Might Do It? We’re still animals, in a sense. Pack creatures. We’re social, want acceptance, and are interested in what the crowd is doing. It’s easy to follow what they’re doing and scary to strike out on your own. For example, a massive sell-off in the market triggers mass fear. What happens? Everyone follows the lead and sells. I’m not saying it’s never a good time to sell, but how many times did you see the market rally soon thereafter? Wouldn’t you have made more money if you continued buying on the way down…instead of selling? I’m willing to bet you’d have a bit more money than the followers.

In a nutshell, playing the market is a balance of fear and greed. And like most things, should be taken in moderation. Lean to far one way or the other, and you’ll find yourself in trouble. It’s about buying acceptable risk and selling before trouble begins to brew. Haven’t you noticed that stocks are much more affordable when the crowd is avoiding them?

I think you’d find that funds with fewer shareholders tend to outperform the most popular funds. Why? That pack mentality can cause unnecessary volatility (fear and greed in each taking their turn)…which can translate into poorer performance.

How to Dodge that Bullet: You should know, by now, that market timing is way too difficult to be practical, so stop hunting for tops and bottoms…especially within the “latest and greatest” industries. Instead, look for unpopular (but strong) companies or industries to invest in.

For more information on Trading Mistakes, check out all of the top trading mistakes I revealed here >>

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Do Fridays make you feel like this?

I can’t say I feel like that every Friday, though today is a beautiful day in March! I can’t wait for Spring, so I can totally relate.

Happy Friday !

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OK, OK…this isn’t about falling in love with someone.

What is it? Staying or investing in a losing company based upon the fondness you have for the company’s industry, products, reputation, etc.

What Makes me Think you Might Do It? Humans are emotional creatures (yes, really!). Developing an emotional bond with a stock is just as easy as bonding with your friends. For example: You’re a car enthusiast and invest in GM, Ford, or Toyota stock (or maybe you, or a friend or relative, work for a car company). You love cars (and/or these friends, relatives, and companies) so much that you don’t even consider selling when the automobile meltdown happened. “Aww, that’s really horrible. I know they’ll recover…they’ve just got to! They’ve just got to keep building those fantastic cars! They have to bring that concept into production…I want it so badly….that’ll make their stock soar once again!” I imagine your portfolio would be down quite a bit, don’t you think? Does that sound familiar, at all?

How to Dodge that Bullet: Look at it as a numbers game. That’s it! X shares bought at Y price…then X shares sold at Z price (and Z should be higher than Y, of course). Outside of researching company fundamentals (to ensure it’s solid), do not focus on the company. Products and technologies are the lifeblood of companies, but a love for those aspects over their actual viability will get you into trouble.

For more information on Trading Mistakes, check out all of the top trading mistakes I revealed here >>

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What is it? Putting too much in a single (and somewhat shady) stock.

What Makes me Think you Might Do That? Even though fundamentally strong companies are what we know we should invest in, we really want more profit from those trades than is typically available. You think you understand investing (and you actually may) and you feel that investing in these boring companies for minimal profit is beneath you. I understand that…I still catch myself trying to justify investing in a riskier company.

People want to find the next Google and make oodles of cash in minimal time, and retire early. Sure, that sounds great, and people fail finding these companies day in and day out. It’s a rarity to actually find a “next Google” and ride the rise to riches. Take a look at my Momentum Investing posts to see how much work is involved.

These growth stocks trot along, typically showing very little price movement. Suddenly, they either skyrocket on news with more hype than it’s worth, or they run out of money and fold (much more common).

One statistic says that the NASDAQ delisted about 2,200 firms from 1997 to 2002. Can you imagine how much money was lost in their doing so?

How to Dodge that Bullet: Invest in solid, fundamentally strong companies, instead of smaller, speculative ones. If you want better odds on your returns, you could always look for companies that pay dividends (make sure they’re still solid, of course).

For more information on Trading Mistakes, check out all of the top trading mistakes I revealed here >>

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I’m going to introduce a few specific indicators to help you identify momentum investing candidates. Keep in mind, however, these are averages of prior big-mover stocks, and these indicators may not be reproduced by any momentum stock now or in the future:

• The current stock’s median price should be over $25.
• The P/E ratio of the company should be over 30.
• Earnings growth should be at least 24% for the year.
• The RSI (Relative Strength Index) rating should be at least 85.
• The earnings increase for the current quarter is at least 34% (on average).
• Their relative strength has been growing for at least the last 6 months.
• Companies should have at least 5 million outstanding shares of stock.
• The average daily volume is above 75,000 shares.
• The company’s industry should be among the highest 30% of the market.

Taking a look at these individual aspects, don’t be fooled into thinking that finding these companies is a purely numerical process. We all know that things are rarely as easy as they first appear. Here are a few caveats:

1. Knowing how to interpret market conditions for any one of the industrial sectors before you apply these filters is of utmost importance! Fluctuations in economies and industries translate into fluctuations in the filters above.

2. Developing the ability to decode the stock of information that you uncover often takes years of experience.

3. Even with the skill to uncover these diamonds in the rough, stock screening can take many hours.

With those warnings in place, it sounds a little bleaker, doesn’t it? Forgive me, and know that I have to tell the truth. It isn’t an easy process. Also know that it is possible to find these stocks. The most difficult part is in the time spent.

Feel free to comment or ask questions about this miniseries.

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You might be wondering how people find these highly-enriching stocks before they move up. I’m here to tell you that the answer is so obvious, it might surprise you.

Let’s say, for example that you are in charge of constructing a new government building. Would your methods suddenly be new or different? Would you use unproven systems? Of course you wouldn’t. You would use the most thoroughly tested methods and the strongest materials with the most precise plans, and the absolute best engineers to build it.

A winning portfolio of stocks is built in an identical fashion. Since you realize that the fastest-growing companies see the highest levels of profitability and the most favorable price-action, why not invest exclusively in these ‘best-performing’ stocks? Of course, your answer is likely: “which companies are those?”

Here is a simple answer. Take a look at history’s top-performing stocks (yielding ten-fold or higher returns) and study them. Find the unique characteristics that they all had in common. Then you look through today’s stocks for those same characteristics.

As an example, let’s look at the 1990’s. Clear Channel Communications rose over 5,500%. Emulex saw gains of 6,400%. Dell Computer climbed nearly 10,200%. Activision gained nearly 14,000%. Semtech rose over 15,000%.

Investors in these companies became multimillionaires. In the same way, momentum stocks of today will create multimillionaires in the near future. And yes, you can join those ranks. Let’s look at what you’ll need to do.

First, you find all of the characteristics that these companies shared before they zoomed upward…keep in mind, there really are only a few different things. Second, set up a stock screener for these elements across all the stocks available for purchase. Third, you narrow down to a few that exhibit these same criteria (which of course are the ones that are most likely to grow ten-fold or more). Finally, you buy into a few of these companies and wait for the magic to happen.

Honestly, it should not take too long before your portfolio starts to grow. As we know history repeats itself, and that alone should tell us that the share price should follow earnings.

Stay tuned, however, because we’ll cover other factors to consider as well.

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It’s really all about math. Starting with a $10,000 investment, a ten-fold rise yields $100,000. Repeating that ten-fold rise again, you now have $1 million. That’s an indisputable fact.

How easy is it to find the next ten-fold rise? It’s not as difficult as you might think. A recent example would be Best Buy. In five years, it made a 30-fold rise! Surprisingly, there are dozens of other impressive examples that occurred in the bear market of the past three years. Companies that saw a 14-fold rise in that time period include Ultra Petroleum, Lannett Company, Headwaters Inc. and Multimedia Games. Meanwhile, Alliance Gaming has risen more than 29-fold!

Each of these stocks has been a boon to investors. Each is what professionals would call a “momentum stock.” By definition, momentum companies experience dramatic gains in sales, earnings, and stock movement.

Despite their amazing gains, you probably aren’t looking these companies. I’m actually willing to bet that if you looked at current gainers (momentum stocks), you don’t own a single one. On the bright side (if you can call it bright), you are not the only one!

Most people don’t truly understand what they need to do to build life-changing wealth. Certainly, the desire exists but the execution isn’t good. To quote Yogi Berra: “If you don’t know where you’re going, the chances are you won’t get there.”

As in Las Vegas, following a system that, statistically, gives you the best chance at winning is the key to life-changing, legacy-leaving wealth. That really is the key. Great wealth, requires an investment method that is  tested and proven to succeed in any market condition.

Keeping these so-called ‘momentum investing stocks’ in your portfolio will make this wealth-building task much easier. It’s this rational method to investing that not only succeeds bull markets but also in bear markets. It works regardless of what the market averages look like, or whether financial advisor needs a tune-up. Finding the right stocks (of the “momentum” variety, of course) is all that it takes.

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Making big money in little time means finding the fastest-growing stocks now so you can enjoy financial freedom in the very-near future.

We’ll closely examine how to qualify these fantastic stocks before they begin soaring, multiplying your money 100-fold or more. Plus, you’ll learn both when to buy and sell, so you can keep your insane profits as you go.

Even more exciting is that you’ll find that these companies are less risky than you might think. Now of course, buying distressed or second-rate companies is quite risky, but buying flawlessly managed, rapidly growing companies with double or triple-digit growth rates, high returns, and strong share prices is not.

In the blog posts that follow, you’ll see exactly how to spot these stocks before they launch upward, and how owning just a couple of these stocks can make $1 million out of just $10,000.

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By now, everyone knows that doubling a penny each day for a month will net you over $5.3 million (tap away on the calculator if you’re skeptical).

The power of compounding money is awesome, isn’t it! This is what attracts many investors to trade what are known as momentum stocks. Investing in this class of stock, you’ll find the fastest-growing companies (which of course means the fastest rising stocks) in the market. There shouldn’t be any mystery around them. Compared to other companies, they just have the best operating margins, profitability, sales growth, and relative strength. A number of the top-performing stocks throughout history (the ones that seem to multiply investors’ money one-hundred-fold) are the very same companies you’ve known for years.

I assume you’ve heard of (or even shopped at) Wal-Mart? The company’s stock price rose 40,232% during the last bull market. If you had invested just $10,000, you would have turned that into more than $4 million. Do you, or your employer use computers? Do they run Microsoft software? That stock rose 61,034% in the first 13 years that it traded publicly. That same $10,000 investment would have become more than $6.1 million. I’m certain that you surf the internet, right? After all, if you’re reading this article on my blog, you’re on the internet! The largest manufacturer of switches and routers for the Internet is Cisco Systems, which rose 95,667%, just in the 1990s! Again, that very same $10,000 investment would have grown to an amazing $9.56 million in just over 9 years. Of course, being as large as they are now, none of those companies could repeat those gains again.

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