I'm going to share with you one of the most powerful things I have ever read. It made me believe that anything was possible. And that whatever success I wanted to achieve, I indeed could achieve it.
It would not be without hard work. But the concept was simple. And I instantly knew it to be true.
They called it a secret. In fact, it was literally called “the greatest secret in the world”. And that secret was this: the key to success was that you only needed to be a small, measurable amount better than mediocrity to succeed.
Is that really true? In its simplest form it is. The book went on to tell of why this was true. And in short, they described how most people give up on the meaningful things they hope to accomplish.
I of course knew that true greatness would take a lot more than being just a few steps ahead of the pack. And that if you wanted to be the Michael Jordan of your profession, it would take a lifetime of dedication and being born with the right genes.
But most people don't need to be the Michael Jordan of anything in their life to have life changing success.
They only need to be a small, measurable amount better in the important things in their life.
Want to pass that test that will get you that promotion? Stick to your study times and don't blow them off for some silly TV show and you'll be better prepared to pass that test.
Want to lose weight? Have one less can of pop each day or one less sugary snack and watch how that can set in motion a metamorphosis.
Want to make more money in the stock market? If all you did was have one less loser each month, and replace it with one more winner, that could transform your portfolio.
You don't need to be as good as Warren Buffett to achieve your investment goals. By simply making a few changes in how you pick stocks, the extra results can quickly add up.
But you have to know where to begin.
Continued . . . .
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One Less Loser
Setting a goal to have one less loser may not sound exciting, but the results can be dramatic.
There are over 10,000 stocks out there. So be choosey. One of the best ways to put the odds of success in your favor is to focus on the top industries. Why? Because roughly 50% of a stock's price movement can be attributed to the group that it’s in.
That's why, oftentimes, even a mediocre stock in a top industry can outperform the strongest stock in a weak industry. In fact, in my testing I have found that the top 50% of Zacks Ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
If your last loser was in an underperforming industry, you were betting against the odds.
Instead, stick with the best performing industries and put the odds of success in your favor.
And when you do find yourself in a losing trade, get out sooner.
Nobody likes to take a loss. But don't let your unwillingness to do so ruin your portfolio. Smaller losses are easy to overcome. But big losses, like -30%, -40%, and -50% losers can devastate your portfolio, not to mention your confidence.
If you found yourself driving the wrong way on a one way street, you wouldn't keep driving the wrong way or speed up, you'd turn around and get off. Same thing with stocks. If you bought a stock expecting it to go up, and it's now doing the exact opposite, get out before you crash your portfolio.
One less loser, or even just deciding to take smaller losses, will immediately set you apart from the typical mediocre investor.
One More Winner
Now if you can replace that one less loser with one more winner, you'll compound your success even more.
First, stick with the investing style that's right for you. There are many different investing styles out there. The four main fundamental styles are Momentum, Aggressive Growth, Value, and Growth and Income. You can also apply Technical Analysis to any of these styles, and others as well.
But make sure you employ proven techniques to get the most out of each style. For example, if you're an Aggressive Growth investor; did you know that stocks with the highest growth rates perform almost as poorly as those with the lowest growth rates? It's true.
This is because the companies with the highest growth rates are often unsustainable. And once those sky-high growth rates start to come down, even though they may still be spectacular, the price of the stock will fall back down to earth as well.
Stick with companies with growth rates above the median for their industry, but less than 50%. That range has produced some of the best results.
If you're a Value investor; do you know which valuation metrics produce the best results? Better yet, do you know what valuation ranges have the highest probability of success?
In my testing, I have found that the Price to Sales ratio (P/S) is one of the best valuation metrics out there. And that stocks with a P/S ratio of less than 1, by far, produce the highest returns. Between 1-2 still produce stellar results. And between 2-3 outperform the market. But once you get over 4, there is a higher probability of losing on that stock than winning.
That, of course, does not mean all stocks with a P/S ratio above 4 will go down. But if the odds of winning are greater below 1 (or at least below 3) and worse above 4, then by simply focusing on stocks in the optimum valuation range, you are now one step closer to having one more winner.
Don't worry whether you've picked the best stock on the planet. In fact, the best stock on the planet today may not be the best stock on the planet tomorrow. But it doesn’t matter.
All you need to focus on are good stocks. Or just slightly better stocks than you're picking now to start seeing the kind of success you've always wanted.
And one small better decision will set in motion other better decisions. And before you know it, you'll be achieving your goals.
Proven Profitable Strategies
Picking better stocks and making better decisions is a lot easier when there’s a proven, profitable way to do it.
Here are a few of my favorite strategies that can help you pick better stocks today.
New Highs: Studies have shown that stocks making new highs have a tendency of making even higher highs. And this strategy proves it. The alignment of positive price action and strong fundamentals creates all the necessary conditions to see these stocks soar to even greater heights. Over the last 19 years (2000 thru 2018), using a 1-week rebalance, the average annual return has been 48.8% vs. the S&P’s 4.8%, which is 10.2 x the market.
Filtered Zacks Rank 5: This strategy leverages the Zacks Rank #1 Strong Buys, and adds two time-tested filters to narrow the list of stocks down to five high probability picks each week. Over the last 19 years (2000 thru 2018), using a 1-week rebalance, the average annual return has been 54.3%, which is 11.3 x the market.
Small-Cap Growth: Small-caps have historically outperformed the market time and time again. Often these are newer companies in the early part of their growth cycle, which is when they grow the fastest. This strategy combines the aggressive growth of small-caps with our special blend of growth and valuation metrics for explosive returns. Over the last 19 years (2000 thru 2018), using a 1-week rebalance, the average annual return has been 56.2%, beating the market by more than 11.7.x the returns.
The best part about these strategies (aside from the returns) is that all of the testing has already been done. There’s no guesswork involved. Just point and click and start picking better stocks on your very next trade.
Where to Find These Strategies
There's a simple way to access them: Try our Research Wizard stock-picking tool for the next 2 weeks free.
Choose from proven, portfolio-multiplying strategies that fit your trading style and get fresh buy lists from those strategies every day.
Since 2000, the Top 10 strategies inside the Research Wizard have soared past the S&P 500's average of +4.8% per year. These 10 average more than +40% per year.
Recently, during 2017-2018 our strategies more than doubled the market. One of them compounded to +98.3%.
Want to see their latest buy recommendations? Starting today, I invite you to do so absolutely free.
Or, if you prefer, you can use the Research Wizard to create and test your own stock-picking screens. It's easy to do. And you can start outperforming the market on your very next trade.
One more thing: If you start your free trial no later than midnight Sunday, February 10 you can download our Top 5 Valuation Secrets (also free). This Special Report shows how to quickly spot the best stocks for making money.
See the latest Research Wizard stocks right now >>
Thanks and good trading,
Zacks Executive VP Kevin Matras is responsible for all our trading and investing services. He also developed many of Zacks' most powerful market-beating strategies that come with the Research Wizard.