When it comes to find the next game-changing stock, every investor would like to say they saw Apple, Google, Starbucks or Amazon coming ahead of time. But there was a time many would have laughed at investing in what would later become the next big thing, and even more who missed out on the investment for any number of reasons.
The truth is there is no shortage of promising stocks, and you can be just about anywhere – the gym, a work happy hour, standing in line for coffee – and get plenty of free advice on how to go about finding them. It’s true there are many methods and strategies to investing in your next great stock. It’s also true that your odds of accurately predicting the next big winner are incredibly low, if not impossible.
Even so, here are five commonly used tips to help lead you to the next game-changing stock.
Knowledge and research are power. Zacks VP Kevin Matras says to never get caught off guard by things you could have known about or should have known about beforehand. Many game-changers are simply ignored until they become part of a bigger trend. Research will set you apart, and is the only way to successfully find game-changers, says StreetAuthority Chief Strategies Andy Obermueller. If you’re limited on time, focus on a market or niche you’re familiar with.
See beyond today. One of the things all great companies have in common is a product that people have to have and can’t live without. What does that look like? Sometimes the key is to use your imagination and look beyond what the numbers show today to see opportunity. A product can be revolutionary, or it can be worthless with no potential market. History has proven this correct (see Netflix, Amazon) time and time again.
Invest in bold predictions. Because of the long odds (agreed upon nearly universally) involved, you have to be forward-thinking on a groundbreaking idea or revolutionary product. The ground floor of an opportunity is where the most money is made.
Eliminate what doesn’t work. Create a simple checklist to help you eliminate what history has already told you doesn’t work, which will greatly improve your odds of finding a big winner. Michael Cintolo of Cabot Wealth Advisory focuses on the price of the stock (staying above $10 per share), trading volume (staying around $50 million of dollar value per day), uptrend (demand above their 50-day moving average) and earnings estimates (15 percent for upcoming year).
Trust the chart. The price chart of a stock going back a year or two will show its volatility and if it’s rising rapidly. It will also show if big investors are buying in despite skepticism. Investopedia suggests if a stock has a volatile price pattern, it generally means the company has no clear advantage in the marketplace for its product or services versus the competition.