To achieve truly high returns at stock investing, an investor should start their search for hot stocks with Industry Sectors. No matter how bad a company’s financials may be, no matter how overvalued a stock is, if a company does business in a hot Industry Sector, the stock will usually move up with the industry.
Just recently we saw the price of gold and oil rising. Naturally, all the companies involved in those areas shot up. Many stocks were going up 300% or more within months. These are the stocks you want to be in.
To find these hot Industry Sectors you can use Yahoo Finance (a free source) or a paid service such as Investor’s Business Daily. IBD lists 197 Industry Sectors. I’ve never bothered to count how many are listed at Yahoo Finance, but it could be close to the same.
With so many Industry Sectors how does one find the best ones? I like to use a 10-Day Price Delta. What this means is that I will take every stock in a sector and add up it’s gain or loss over the past 10 trading days. I then divide that total by the number of stocks in that sector to get an average return for that Industry Sector. I then do this for all 197 Industry Sectors. I know this sounds like a lot of work, I like to be precise.
If you use an Industry Screener you can do it rather quickly. IBD, and other financial websites will keep a list of the top industry groups. You can use those if you like as a starting point for your stock searches.
Once finished I now know how much each sector gained or lost over the past two weeks of trading. I then select the top ten Industry Sectors. It is only now I begin my search for the next hot stock. Only the stocks in the top ten Industry Sectors will even be considered for inclusion on my buy list.
One word of warning though. Stock investors can be fickle. An Industry Sector that is hot this week can be out of favor next week. Likewise, that stock that shot up 300% can come crashing down VERY quickly if the sector cools off. I suggest you run your check on the top Industry Sectors weekly. If the Industry Sector you are in has dropped off the top ten list, I suggest you consider getting out.