I'm going to share with you one of the most powerful things I have ever read. It made me believe that anything was possible. And that whatever success I wanted to achieve, I indeed could achieve it.
It would not be without hard work. But the concept was simple. And I instantly knew it to be true.
They called it a secret. In fact, it was literally called “the greatest secret in the world”. And that secret was this: the key to success was that you only needed to be a small, measurable amount better than mediocrity to succeed.
Is that really true? In its simplest form it is. The book went on to tell of why this was true. And in short, they described how most people give up on the meaningful things they hope to accomplish.
I of course knew that true greatness would take a lot more than being just a few steps ahead of the pack. And that if you wanted to be the Michael Jordan of your profession, it would take a lifetime of dedication and being born with the right genes.
But most people don't need to be the Michael Jordan of anything in their life to have life changing success.
They only need to be a small, measurable amount better in the important things in their life.
Want to pass that test that will get you that promotion? Stick to your study times and don't blow them off for some silly TV show and you'll be better prepared to pass that test.
Want to lose weight? Have one less can of pop each day or one less sugary snack and watch how that can set in motion a metamorphosis.
Want to make more money in the stock market? If all you did was have one less loser each month, and replace it with one more winner, that could transform your portfolio.
You don't need to be as good as Warren Buffett to achieve your investment goals. By simply making a few changes in how you pick stocks, the extra results can quickly add up.
But you have to know where to begin.
Continued . . .
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One Less Loser
Setting a goal to have one less loser may not sound exciting, but the results can be dramatic.
There are over 10,000 stocks out there. So be choosey. One of the best ways to put the odds of success in your favor is to focus on the top industries. Why? Because roughly 50% of a stock's price movement can be attributed to the group that it’s in.
That's why, oftentimes, even a mediocre stock in a top industry can outperform the strongest stock in a weak industry. In fact, in my testing I have found that the top 50% of Zacks Ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
If your last loser was in an underperforming industry, you were betting against the odds.
Instead, stick with the best performing industries and put the odds of success in your favor.
And when you do find yourself in a losing trade, get out sooner.
Nobody likes to take a loss. But don't let your unwillingness to do so ruin your portfolio. Smaller losses are easy to overcome. But big losses, like -30%, -40%, and -50% losers can devastate your portfolio, not to mention your confidence.
If you found yourself driving the wrong way on a one-way street, you wouldn't keep driving the wrong way or speed up, you'd turn around and get off. Same thing with stocks. If you bought a stock expecting it to go up, and it's now doing the exact opposite, get out before you crash your portfolio.
One less loser, or even just deciding to take smaller losses, will immediately set you apart from the typical mediocre investor.
One More Winner
Now if you can replace that one less loser with one more winner, you'll compound your success even more.
First, stick with the investing style that's right for you. There are many different investing styles out there. The four main fundamental styles are Momentum, Aggressive Growth, Value, and Growth and Income. You can also apply Technical Analysis to any of these styles, and others as well.
But make sure you employ proven techniques to get the most out of each style. For example, if you're an Aggressive Growth investor; did you know that stocks with the highest growth rates perform almost as poorly as those with the lowest growth rates? It's true.
This is because the companies with the highest growth rates are often unsustainable. And once those sky-high growth rates start to come down, even though they may still be spectacular, the price of the stock will fall back down to earth as well.
Stick with companies with growth rates above the median for their industry, but less than 50%. That range has produced some of the best results.
If you're a Value investor; do you know which valuation metrics produce the best results? Better yet, do you know what valuation ranges have the highest probability of success?
In my testing, I have found that the Price to Sales ratio (P/S) is one of the best valuation metrics out there. And that stocks with a P/S ratio of less than 1, by far, produce the highest returns. Between 1-2 still produce stellar results. And between 2-3 outperform the market. But once you get over 4, there is a higher probability of losing on that stock than winning.
That, of course, does not mean all stocks with a P/S ratio above 4 will go down. But if the odds of winning are greater below 1 (or at least below 3) and worse above 4, then by simply focusing on stocks in the optimum valuation range, you are now one step closer to having one more winner.
Don't worry whether you've picked the best stock on the planet. In fact, the best stock on the planet today may not be the best stock on the planet tomorrow. But it doesn’t matter.
All you need to focus on are good stocks. Or just slightly better stocks than you're picking now to start seeing the kind of success you've always wanted.
And one small better decision will set in motion other better decisions. And before you know it, you'll be achieving your goals.
Stock Picking Secrets of the Pros
Picking better stocks and making better decisions is a lot easier when there’s a proven, profitable way to do it.
One of the best ways to begin picking better stocks is to see what the pros are doing.
There’s no one perfect way to beat the market. Some traders prefer high flying growth stocks, while others prefer deeply discounted value stocks. Some may prefer fast-paced momentum stocks, whereas others are more comfortable with mature, dividend producing income stocks.
Yet others may want to focus on more specialized strategies like insider trading (the legal kind), institutional buying and selling, large-caps, small-caps, stocks about to surprise, or cheap stocks under $10.
Still others may want to turn their attention to specific sectors or industries like healthcare innovators, biotech stocks, high-tech companies, or the burgeoning marijuana-related investment opportunities.
Or even incorporate options into their portfolio.
Regardless of which one fits your personal style of trade, just be sure you’re getting the best advice from experts who have demonstrated their ability to beat the market.
The best part about these strategies is that all of the hard work is done for you. There’s no guesswork involved. Just follow the experts and start getting into better stocks on your very next trade.
Where to Start
Here's a simple way to start picking more winning stocks.
We offer a unique arrangement called the Zacks Investor Collection. It enables you to consult the picks and commentary from all our long-term portfolios in real time for the next 30 days. Plus it includes Zacks Premium research so you can find winning stocks, ETFs, and mutual funds on your own.
And here’s another great head start: With your 30-day trial you can download our Special Report, 5 Stocks Set to Double free.
Each is the personal favorite of a Zacks expert to have the best chance to gain +100% and more in the months ahead:
Stock #1: Revenue at this trailblazing technology firm is already surging, and with several major acquisitions and powerful new partnerships, the stock is set to soar.
Stock #2: Analysts are steadily increasing estimates for this infrastructure company. The stock was just upgraded to Zacks Rank #1 Strong Buy and explosive gains could be just around the corner.
Stock #3: This small-cap biotech firm is setting itself up to be the Amazon of medical-grade genetic testing. The CEO expects revenue to more than double year-over-year... and the stock could follow suit.
Stock #4: With a forward P/E ratio of 8x, it's a value stock. With EPS estimates increasing in the 99th percentile, it's a growth stock. And with an 8.7% dividend, it's also an income stock. In short, this is a stock you don't want to miss.
Stock #5: This cybersecurity firm has developed hundreds of patents to protect its 400,000 customers from the looming threat. After a brief pullback, the stock is primed to blast higher.
The earlier you get into these stocks the higher their profit potential. Also, the opportunity to download 5 Stocks Set to Double free ends Sunday, July 27.
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Thanks and good trading,
Kevin Matras serves as Executive Vice President of Zacks.com and all of its leading products for individual investors. He is also the Editor of his personal portfolio service, Options Trader.
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