The market is off to its best start in over 30 years! And what a start it’s been.
Already, the Dow is up 10.13%, the S&P is up 12.05%, the Russell 2000 Small-Cap Index is up 12.61%, and the Nasdaq is up 15.51%.
While trade tensions with China weighed on stocks last year, growing optimism over trade talks this year continues to fuel the market, as does a strong economy and the best jobs market ever.
But, like any year, there are some headwinds out there.
So whether you’re bullish on the market or a bit wary, it’s now more important than ever to make sure you’re doing everything you can to get the most out of your trades.
Regardless of which camp you put yourself in, there will be distinct winners and losers as we move forward. So before you make your next trade, please read this first to learn how to put the probabilities of success on your side.
Knowledge Is Power
We’ve all heard the old adage; knowledge is power.
It’s a great saying because it’s true.
And that saying couldn’t be truer than when it comes to investing.
Take a look at your last big loser for example. After analyzing what went wrong, you soon discover some piece of information that -- ‘had you known beforehand, you never would have gotten into it in the first place’.
I’m not talking about things that are unknowable, like inside information or surprise announcements that can catch even the most professional of professionals off guard.
I’m talking about things that you could have known about or SHOULD have known about before you got in.
Did You Know?...
• Did you know that roughly half of a stock's price movement can be attributed to the group that it’s in?
• Did you also know that oftentimes a mediocre stock in a top performing group will outperform a ‘great’ stock in a poor performing group?
• And did you know that the top 50% of Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1?
• And did you also know that the top 10% of industries outperformed the most?
More . . .
Do You Know Zacks' Top 4 Stocks for Q2?
Just released! Four experts each announce their single favorite stock with the best upside for the quarter ahead. One example is a booming sporting goods company, fueled by relentless demand for their products and a strategic partnership with Nike.
Today, Zacks members are invited to download the private Ultimate Four Special Report that names these stocks and spotlights why their gain potential is so exceptional.
See Stocks Now >>
Was your last loser in one of the top industries or in one of the bottom industries?
If it was in one of the bottom industries, you should have known to not take a chance on something with a reduced probability of success.
That’s what is meant by knowledge is power. Knowable things that you need to know.
That’s not to say that stocks in crummy industries won’t go up -- they do. And that’s not to say that stocks in good industries won’t go down -- because they do too.
But more stocks go up in the top industries, and more stocks go down in the bottom industries.
And since there are over 10,000 stocks out there to pick and choose from, why settle for one with a reduced chance of making any money?
Did You Know?...
• Did you know that stocks with ‘just’ double-digit growth rates typically outperform stocks with triple-digit growth rates?
• Did you also know that stocks with crazy high growth rates test nearly as poorly as those with the lowest growth rates?
Did your last loser have a spectacular growth rate?
If so, and it got crushed, would you have picked it if you knew that stocks with the highest growth rates have spotty track records?
It seems logical to think that the companies with the highest growth rates would do the best. But it doesn’t always turn out to be the case.
One explanation for this is that sky high growth rates are unsustainable. And the moment a more normal (albeit still good) growth rate emerges, the stock gets a dose of reality as well.
For example, a company earning 1 cent a share that is now expected to earn 6 cents, has a 500% growth rate. But, if it receives a downward estimate revision to 5 cents, that’s a significant drop. Even though it still has a 400% growth rate, the estimates were just reduced by -16.7% and the price is likely to follow.
If you’ve ever wondered how a stock with a triple-digit growth rate could possibly go down -- that’s how.
Instead, I have found that comparing a stock to the median growth rate for its industry is the best way to find solid outperformers with a lesser chance to disappoint.
Proven Profitable Strategies
Picking the best stocks is a lot easier when there’s a proven, profitable method to do it.
And by concentrating on what has proven to work in the past, you’ll have a better idea as to what your probability of success will be now and in the future.
For example, if your strategy did nothing but lose money year after year, trade after trade, over and over again, there’s no way you'd want to use that strategy to pick stocks with. Why? Because it's proven to pick bad stocks.
On the other hand, if your strategy did great year after year, trade after trade, over and over again, you'd of course want to use that strategy to pick stocks with. Why? Because it's proven to pick winning stocks.
Of course, this won't preclude you from ever having another losing trade. But if your stock picking strategy picks winners more often than losers, you can feel confident that your next trade will have a high probability of success.
Stock Picking Secrets of the Pros
One of the best ways to turn the probabilities of success in your favor, is to see what the pros are doing.
There’s no one perfect way to beat the market. Some traders prefer high flying growth stocks, while others prefer deeply discounted value stocks. Some may prefer fast-paced momentum stocks, whereas others are more comfortable with mature, dividend producing income stocks.
Yet others may want to focus on more specialized strategies like insider trading (the legal kind), institutional buying and selling, large-caps, small-caps, stocks about to surprise, or cheap stocks under $10.
Still others may want to turn their attention to specific sectors or industries like healthcare innovators, biotech stocks, high-tech companies, or the burgeoning marijuana-related investment opportunities.
Or even incorporate options into their portfolio.
Regardless of which one fits your personal style of trade, just be sure you’re getting the best advice from experts who have demonstrated their ability to beat the market.
The best part about these strategies is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start trading like a pro.
Beat the Market on Your Next Trade
We offer a unique arrangement called Zacks Ultimate where you can try all the trades from all our services in real time for 30 days. And just for trying that arrangement, you're invited to download our just-released Ultimate Four Special Report absolutely free.
These aren't just 4 good stocks. They were hand-picked by Zacks experts to have the greatest upside growth potential in this quarter – which is already set to ride tailwinds of a strong economy, fantastic jobs market, and an accommodative Fed.
Stock #1: Earnings are booming for this mid-cap sporting goods company, fueled by relentless demand for their products and a strategic partnership with Nike.
Stock #2: A recent IPO, this data management company is already showing hyper-growth with customers like Google, IBM, Uber, M.I.T., eBay, and 8,000 others.
Stock #3: “Great Outdoors” supplier, soaring far above the 2019 market, still has vast, untapped potential with loyal customers and new products to serve them.
Stock #4: Software developer beat earnings estimates for the quarter and raised guidance for the next 3 months, a rare double indicator for future success.
I suggest you download this Special Report now because the opportunity ends Sunday, March 31.
Look into Zacks Ultimate and these 4 stocks today >>
Thanks and good trading,
Kevin Matras serves as Executive Vice President of Zacks.com and all of its leading products for individual investors. He invites you to try all Zacks private portfolios and download the newly released Ultimate Four Special Report.