Apr 5

How to find hot stocks

Posted in trading

The key to finding the hottest stocks to watch is to understand what you are actually searching for. Here’s a hard and fast rule to consider about watching hot stocks. You want to figure out which hot stock to eventually purchase before the rest of the investors out there buys that same stock. It is just common sense, but remember that when a stock starts to heat up and sell, it’s going to drive the price up based on the laws of supply and demand. The key is to purchase that stock before the demand for it starts.

In so many words, this means that you want to watch out for undervalued stocks before making your move and purchasing shares of it. Additionally, you will need to know how to identify the stocks and their companies that you are looking to invest in. As of today, over 3,000 companies are currently listed on the NYSE, so the search can oftentimes be rather challenging and even frustrating at times. Unless you have an unlimited amount of time on your hands, you’re going to have to narrow down your search fairly quickly. The following suggestions should be considered before investing any of your hard-earned money in a particular stock.

Find a market sector that you are already familiar with – this will save you a lot of time when searching for a potentially hot stock. Knowing and understanding that sector could be the difference between considerable gain and losing your shirt.

Choose a stock that has real value – stocks which demonstrate good fundamentals and have a fairly good recent track record are the ones you want to focus on. Compare the following factors with the stocks you are watching:
• book value
• cash flow
• price to earnings ratio
• return on investment (ROI)

Stay away from those stocks that have potential liabilities – if you find information or news about large companies and their stocks having huge lawsuits looming in the future, walk away and focus on a different stock.

Search out those companies that have a potentially bright future – just remember that past good stock performances can make a U-turn and go in the opposite direction without warning. Before making a purchase, pay close attention to the analyst’s predictions if you find a stock that interests you.

Forget popularity and what others say – believe it or not, you are probably better off looking for a stock that has not hit the spotlight yet instead of the ones that analysts and so-called experts are ranting and raving about.

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