When it comes to investing, we all want to find that one stock that will outperform the rest. Sure, the huge blue chip names can pull it off. However, finding tomorrow’s high fliers early on is where the real money is made.
For average investors, the question is, how do you find those hidden treasures before the rest of the crowd bids the share price into the stratosphere? Over the years, I’ve picked up a few pro pointers that have helped me identify more than a few portfolio all-stars.
First and foremost, narrow down what you want to concentrate on. Do not overextend yourself by attempting to grasp every business and area imaginable. Choose a few areas in which you are naturally more knowledgeable than others, such as technology, healthcare, consumer goods, or anything else. Stick to those lanes if you want to find the best prospects.
Next, put on your detective hat and dissect the finances. Examine crucial metrics like profits growth, profit margins, management quality, and market potential. Find the jewels hidden in plain sight with solid enterprises before the herd does.
You should also keep an eye out for rising prices and trading activity, which are frequently the clearest indicators that a stock is catching fire. Use charts and market data tools to identify individuals who are outperforming the rest. If you know where to look, you can typically find the standouts generating the eye-popping returns.
Finally, create watch lists and set alerts to keep track of any interesting discoveries over time. Keep an eye out for market-moving news, earnings releases, analyst commentary—anything that could lead to a new opportunity. You’ll stay one step ahead of the competition by actively tracking your list.