6/12/2009

How to find stocks likely to go up a lot

Big earnings explosions create big trends. Doubling of earnings is good but the stocks which really make big monster move have huge earnings and sales.

For example if you have Dailygraphs subscription look at the yearly earnings growth trend table on weekly tab (it gives you yearly earnings and price high and low range for the year) for following stocks:

NTRI: between 2004 and 2005 the earnings jumped from 3 cents to 59 cents. That is monster earnings growth. What happened price of the stock went up from 1 dollar to 44.Look at the sequence of earnings before that . For 2002 it was 8 cents, for 2003 it was 3 cents , for 2004 it was 3 cents and then the explosion happen.
GMXR: Between 2004 and 2005 earnings went up from 19 cents to 79 cents as a result price went up from 6 to 42.
MT: 2002 earnings was 40 cents. 2003 was 1.83 dollar and 2004 was 7.31. What happened price went up from 1 dollar to 42 (actually it was below 1 dollar when I first found EP on this stock but IBD rounds it to 1 dollar)
SINA: in 2002 had 3 cent loss. In 2003 had 75 cents earnings. Stock went up from 1 to 46. This was the best performing stock in first phase of 2003 bull market.
SOHU: 3 cents loss in 2002. 81 cents profit in 2003. Price went up from few pennies to 43 in one year.
MICC: earnings went up from loss of 5.90usd in 2002 to 2.26 profit in 2003, stock price zoomed from 1 dollar to 20 dollar.
FSLR: from 2006 to 2007 earnings went up from 6 cents to 1.43 dollar. Price went up ten times from 27 to 283

and I can go on and on. Many of the mortgage stocks which were the biggest winner in 2003 bull market first phase had earnings growth of 500% plus. All of them have gone bankrupt now. But they made 1000% plus price moves in few quarters because of explosive earnings.

Those are the kind of stocks one should look for if you are looking for explosive gains. All the above stocks were unknown , neglected stocks , before they were noticed by market because of their explosive earnings growth. In current market some of those kind of stocks with explosive earnings have started to move now.

You can spend lot of time drawing trend lines, support and fib extensions, or looking for value stocks and cigarette stubs and turnaround situation or search for macro theme, or latest charting techniques or exotic Japanese charting technique, or listening to Crammer, but none of that stuff matters.

If you see the history of stock market for 100 year or more there is one simple thing you will learn, explosive earnings growth leads to explosive price moves. Earnings or expectations of future earnings is what drives stock prices in the long run.





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