With the popular indexes hitting record highs, there has been a predictable parade of articles describing how some investors are returning to the market.
Let's not get into the fact that these folks have unfortunately missed out on a big advance since March 2009. Instead, let's look at one thing you could do if you're similar to them in feeling jittery about stocks.
Don't be embarrassed about the jitters, for starters. After all, stocks are volatile and investors often do lose fortunes.
But if you are nervous, consider focusing on an IBD screen that's most likely to produce steady growth stocks — the , featured on Tuesdays. The names on this list are relatively slow-moving, large-capitalization stocks that should let you sleep OK at night but also have potential for significant gains.
Big Cap 20 stocks generally show calmer trading, with weekly price swings that aren't as large as those for attention-grabbing names like 3D Systems (DDD).
One metric to keep in mind when assessing a stock's volatility is its beta, which is found on the weekly chart of MarketSmith. This tells you how much a stock swings compared with the S&P 500.
A beta of 0.5 means the stock moves half as much as the benchmark index, while a beta of 1.4 means it's 40% more volatile than the S&P 500. You'll find that many Big Cap 20 names are low-beta stocks.
Another characteristic of Big Cap 20 stocks is they'll often offer a dividend. These are generally established companies that are no longer in high-growth mode, so they share some cash with their shareholders rather than just focusing solely on acquisitions or investing in R&D.
You also want to check these stocks' three-year EPS Stability Factors (also found on MarketSmith). The calmest level is 0, while the wildest is 99. You prefer to see calm in this IBD metric, since that suggests shares won't swing as much, and the company will be able to keep paying a dividend.
In that same vein, look for steadiness in terms of appearing on the Big Cap 20 list. If you see a name showing up week after week, that's a good sign. Some less-promising stocks show up for just one week, then can't make the cut again.
The table that accompanies this column lists a few stocks that have appeared in the screen repeatedly from early March through early April.
While Big Cap 20 stocks are calmer than other options, they certainly aren't has-beens. Like any IBD screen, there's an emphasis on growth. Expect to see decent profit growth, price appreciation and even powerful breakouts from sound chart patterns.