Ever wondered how to stock pick successfully? We have an answer for that. AtoZForex believes that there is a special recipe to have luck in stock picking.
4 October, AtoZForex – Everything is not as difficult as it seems: in order to succeed as a stock picker you need to pick the stocks the “pros” do not like. Why is this working?
How to stock pick successfully?
Dynamic asset managers have been hit hard this year, as just 16 percent of them appeared to outperform the basic benchmarks in 2016, according to Goldman Sachs data. This failure to generate returns has caused a large number of investors to collectively shift from active traditional mutual funds to passive exchange – traded funds.
In total, $221,7 billion has got away from traditional mutual funds in the period of the last 12 months, where $174.8 billion successfully landed in the passive exchange – traded funds, as it is reported by Morningstar.
See also: Daily Forex News and trade opportunities
If you are willing to have your own success built in the stock-picking field, there is a relatively simple formula for this. The least-popular stocks by active managers have outperformed the most-loved by as much as 13 percentage point this year, as Bank of America, Merrill Lynch reports. This condition gives investors a reason to think twice before picking the most-loved stock.
Stock picking is tough
The strategy of picking the least-loved stocks has been a solid one for the period of the past couple of years. However, it is often gets disregarded in a momentum-driven market.
In the current market, if you want to go with the least-popular stock-picking strategy, you would be willing to sell positions in Broadcom, Viacom, salesforce.com, Activision Blizzard, NetApp. Moreover, you would consider buying underrated firms such as Legget & Platt, Apartment Investment, and Management, Alliant Energy, People’s United Financial or Brown-Forman.
Nevertheless, even with the best strategy in the market, stock-picking continues to be a risky and tough game.
In addition, while stock picking, you should also involve of course some of the technical analysis as well. One simple formula with the help of 20 and 100 day SMAs can help you to define a bullish trend so that your stock would be on the right side. By using such strategy you would be looking into 100 day SMA to slope upwards and price testing either 20 day or 100 day SMA. Once you see the SMA being tested you can pick your stock (invest in it) and look for a price appreciation for at least 1-3 weeks period.
The best trader of the year Yagub Rahimov describes more about these opportunities in his “Forex NOT For Dummies” book where he covers up the part where he successfully short sold the Deutschebank stocks for as much as 66% collapse in less than 18 months.
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