What is you vehicle selection strategy | stockbee

11/23/2015

What is you vehicle selection strategy


The kind of stock you buy or sell is very important if you are looking at making money in the market. If you select a vehicle capable of powerful move , you are putting yourself in good position. If you select dodgy vehicles you are not likely to make much money.

If you are looking for explosive returns you must select a vehicle capable of making explosive move. In order to do that you should know what are the common characteristics of stocks (vehicles) that make big moves historically. And then use those criteria to find similar stocks in current market conditions. 

Historically momentum and growth stocks have made biggest moves in the market. A stock that has great growth happening currently or has in recent quarters had earnings acceleration or surprise are one of he categories of stocks you can focus on if you are looking for big winners. 

OME is a example of stock that has recent earnings surprise and acceleration and that is why it made big move.
 As  you can see this stock in recent quarter had 83% earnings surprise. That triggered the  big move. And that was the bur signal for this stock.

VLRS is another example of stock which we recently bought based on earnings surprise and acceleration and good anticipation setup.

As you can see below the stock had big earnings surprise recently. The stock doubled from its first big surprise of 571%.

One of the recent  buys for me is CRAY, which had 362% surprise. 


The tendency of stocks to make big moves post earnings surprise is called PEADS (post earnings announcement drift). It is a very well researched market anomaly. Stocks that have surprisingly good earnings tend to move in direction of the surprise for next few months to quarters. If you are serious about making money search for all PEADS post on this site. I have written about this in detail several times for many years. 

Momentum stocks are another category of stocks which make big moves. If a stock doubles, it is a very good candidate for doubling , tripling or going up 1000% plus. Momentum stocks every year dominate the list of biggest movers or the year. It is relatively easy to scan for these.

Sometimes a turnaround kind of situation can also lead to big moves in stocks, in the case the real big move happens only after the turnaround started and buying in anticipation is not the best of the strategy. If there is real turnaround you will see earnings surprise and big earnings jump. 

If you do good job of vehicle selection , you put probability in your favor, if you always buy stocks with negative earnings surprise and then expect to make money, then you have no vehicle selection strategy. 

If you want to make money trading do damn good job of selecting the right vehicle. 

What is your vehicle selection strategy?

If you can not answer that question, then you do not have one... and you might as well stop trading ....

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