The 6 Keys to Building a Winning Portfolio of Stocks – Part 5 of 6
By Dr. Thomas K Carr
The following article is adapted from Dr. Carr’s forthcoming new book, “Stop Trading, Start Investing: the 6 Keys to Building a Winning Long-Term Portfolio”
In my previous articles in this series Pt 1 , Pt 2 , Pt 3 and Pt 4 , I looked at how “organic growth” that can be sustained over time, “fair value” as measured by the price to sales ratio, “relative weakness” in the stock price, and analysis of a company’s “mission statement” are all essential to finding great long-term investments in the stock market. In this article we are moving on to key number five: “momentum”.
All these articles are from a FREE BOOK I’m giving away to subscribers of my new service, The IXTHYS Letter (www.ixthysletter.com – coming in August, 2015). The book details at length everything you need to know to find winning stocks. If you want to know more about this new service, you can sign up here.
Once we get to this point, we should have five or six solid long-term investment candidates remaining on our short-list. This then brings us to the fifth and final key to finding the very best long-term investments currently on offer in the stock market: momentum. Everything we have done up to this point has been about finding great long-term investments. This final step is more about the short-term. Here we are looking for stocks that are positioned in such a way that they are likely to rise soon after we buy the stock. If the stocks on our short list of stocks are not positioned this way, we keep them on our watch list for regular monitoring, but we will not buy them until they are so positioned.
Momentum as I define it, is not simply a matter of the stock price. The kind of momentum I’m talking about here comes in three different forms: momentum in the stock price, momentum in the opinions generated by the professional analysts who follow the company, and momentum generated by the financial media. Let’s look at each one of these separately.