Investors tend to ignore those every day game changing stocks that are shaking things up. The "shake" sometimes isn't earth shattering like a new operating system or internet search would be, but they are just as important.
Investors are typically worried about when they should actually pull the trigger. The decision to buy the stock you think is a game changer must be accompanied by some research. Identifying the tell-tale signs can make all the difference.
Some Game Changers are Driven by External Events
Biotechs often give you the story on how they plan on changing the game. The key word in that sentence is that they "plan" on changing the game, but they need positive data to come from trials that can often be hard to fully grasp.
Other stocks are about to change the game due to a significant positive shift in margins. The more margins grow, the more earnings are able to grow. Only mild revenue growth thrown in on top will drive investors to increase the multiples applied to these types of stocks.
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From 4,400 stocks covered by Zacks, a mere handful are predicted to be the next Apples, Googles, and Teslas. These are breakthrough companies on the verge of breakout stock prices. They can shake up industries and make early investors very wealthy.
This Game Changers portfolio has been off to a rocket start since launching in October and was quickly closed due to excessive demand. Now it has been re-opened but only until this Sunday, December 20. Don't miss the chance to see its exciting stocks, plus a new ticker that will post after market open Monday.
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We cannot count out the activist investor. They are the ones that buy a significant percentage of the outstanding shares then attempt to persuade the management on a change of course that they believe will lead to share appreciation. They are not always correct, but their buying power must be respected.
The Best Share These Characteristics
The game changers that have the longest runway are those that see significant margin expansion. That is a two part idea and both concepts are equally important. There needs to be enough of a competitive advantage to give the company some lead time. There also needs to be a boost in margins from either price increases or sustainable reductions in the costs involved in producing the service or product.
Being under the radar is an idea that companies don't really like. Investors, on the other hand, love to find that new idea that could potentially change a part of everyday life. Most game changing stocks are the ones that have a product or service that the general public doesn't fully understand. Henry Ford said it best, if he gave the people what they wanted, it would have been a carriage with more horses!
Another idea to keep in mind is to watch the shorts and look for covering. The best way to determine if shorts are covering is to look at the short interest data that comes out twice a month. If the number of shares short is consistently decreasing, you could see a mini squeeze. If the count is increasing, you might want to go back to the drawing board.
The Best Time to Sell?
Selling too early is the common fear of people that look to invest in game changing stocks. Capturing a gain of 40% over a few months is great, but a few more months might result in an 80% gain. Without giving a stock constant attention, there are a few signals that tell you if it is time to sell.
As much as being under the radar is important to discovery of the stock, the other end of the spectrum applies to when to sell. If everyone is telling you about a stock or a concept that is sweeping the nation, then it's time to reduce your position. When there are no new buyers left, the stock is simply not going to go much higher.
The best way to know if the tide is turning is to follow the earnings estimate revisions. Luckily, the Zacks Rank takes most of the guess work out of this tedious task. When analysts are saying that the company will not earn as much money as they expected, buyers will generally dry up too. Earnings drive stock prices, so make sure this is the foundation of your investing research.
The Best Game Changers
If you are interested in the rare breakthrough companies that are also priming for stock price breakouts, you might want to look into the trading service I'm directing: Zacks Game Changers.
For more than 15 years I've specialized in the exhaustive work of tracking technological developments and the companies that are likely to profit from them. Our service combines this analytical research with Zacks Rank and other signals that indicate when to buy, when to sell, and when to ride in pursuit of exceptional profit.
While the market has been struggling since October, our Game Changer portfolio has made a rocket start. Monday morning I plan to pull the trigger on a fresh pick that has our indicators flashing. This company is about to capture a dominant share in its industry. On Black Friday its products flew off the shelves of retailers. It's a Zacks Rank "Buy" with the highest Growth style score and you can be among the first wave of investors to jump on it.
Please note that we want to make sure that the service's members won't have to worry about too many investors getting aboard ahead of them. So entry closes midnight Sunday, December 20.
Good Investing,
Brian
- See more at: http://www.zacks.com/stock/news/201580/how-to-profit-from-game-changing-stocks#sthash.ONly9fEa.dpuf
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