Ever since The New York Times called me “an icon among growth investors,” most folks think of me as a growth stock guy.
And it’s true that I’ve spent my career helping investors discover high-quality growth stocks that can deliver extraordinary returns.
I’ve helped people make 1,125% in fast-growing beverage maker Hansen Natural… 457% in fast-growing energy firm Holly Corp… 430% gains in fast-growing computer chip maker NVIDIA… 307% in fast-growing computer maker… and 477% in fast-growing computer storage firm EMC Corp… and the list goes on and on.
I mention those to illustrate the kind of gains we can make — but we don’t have the luxury of waiting for perfect market conditions. That results in a lot of wasted time…and it can really short-change your retirement account.
Right now is a great example:
Analysts are forecasting negative first-quarter earnings for S&P 500 companies, on average. However, we can still make good money on the companies who DO turn in profits. And I am confident we will.
Getting into big stock growth winners (like the ones noted above) has helped my readers double and triple the market’s returns over the past 20 years.
As you probably know, a key part of successful growth investing is time. Even the best, fastest-growing companies need 3, 5, even 10 years to become industry dominators. We must give growth stocks time to “gain weight” in order to maximize our returns.
But about 10 years ago, while I was fine-tuning our long-term strategies, an accident occurred. I certainly never expected it — but ultimately it allowed my team and I to develop a unique and powerful method for big short-term stock market profits.
I use it to make sure my readers invest in the stocks that will not only survive, but thrive in any market condition.
What’s really great about this trading method is that anyone can use it. It only involves buying and selling stocks, none of which are exotic or risky. Even better — you won’t need options, futures, leveraged ETFs, or anything you need a special account to trade. All you need is a brokerage account to follow my recommendations.
Another neat thing about this system is that, again, it doesn’t rely on the overall market to perform a certain way. This system makes great money in any market. In fact, this method of buying and selling stocks returned more than 50% per year from 1998 to 2003, a period marked by one of the worst bear markets in history.
So, if you’re willing to try something new, and willing to “step outside the box” in order to make A LOT more money, then you can rack up plenty of gains like the great winners I mentioned above.
Here’s the story of my accident… and how you can use it to turn the stock market into a tremendous source of side income.
Some Stocks Are A LOT Better Than Others
Way back when I was in college at Cal State Hayward, one of my professors tasked me with creating a model portfolio to mimic the performance of the benchmark S&P 500 index.
It was a dream assignment for a numbers guy like me… but I failed at it spectacularly — because my model kept beating the S&P 500.
This was in the late 1970s, when everyone believed it was virtually impossible to beat the market without taking on excessive risk. Conventional wisdom was that you might get lucky for a while, but no one could consistently beat the market.
Thankfully, my professors gave me unprecedented access to Wells Fargo’s expensive, top-of-the-line mainframe computers to continue to build my stock selection models. (Remember, this was more than 30 years ago, before laptops and PCs!)
Through hundreds of hours of research, I discovered how elite stocks consistently outperformed the broad market, year in and year out. Through extensive analysis, I isolated the eight key qualities that these super-performing stocks shared… and I developed a system for riding them. The research I did back then serves as the foundation of what is now an advanced, high-tech method of computerized market analysis.
If you’ve been investing in stocks for a while, many of the qualities I’ve identified probably won’t surprise you.
That’s because four of the eight qualities are related to earnings. So, this is a crucial moment for profit generation.
But millions of people will miss it.
On any given business day, these folks are distracted by the blinking lights and flashing numbers they believe make up “the stock market.” This leads them to react to earnings. And the last thing you want to do is have that same knee-jerk reaction.
Folks forget that a stock isn’t just a flashing light on a screen or a trading hot potato. When you buy a stock, you buy a partial ownership stake in a real business. You own a slice of that company’s equipment, inventory, patents, real estate, and brands. You become financially exposed to both the company’s upside and downside.
The major drivers of a stock’s prices are earnings (or the anticipation of them). The more a company grows its earnings, the more its shares will be worth.
Stock price trends can diverge from earnings trends for a while, but over the long-term, if a company grows and grows the amount of cash it takes in, its share price is sure to head higher. That’s how the market works.
And that’s why if you’re looking for stocks with massive upside potential, you should focus on the companies with high revenue and earnings growth — especially when so many others are falling short.
This is why my computer programs are constantly scanning the market for companies with outstanding quarterly earnings growth… outstanding annual earnings growth… and a tendency to surprise Wall Street analysts with better-than-expected earnings growth.
In addition to qualities related to superior earnings growth, my system screens for companies with increasing operating margins, increasing sales growth, high returns on equity, and strong cash flow.
Corporate America is not Lake Wobegon, where all the kids are above average. The brutal truth is that some companies are much, much better than others. They have better management, better products, bigger profit margins, stronger sales, stronger balance sheets, etc.
My system analyses over 5,000 stocks, grades them according to the individual qualities listed above, and also combines the individual metrics to create an overall composite grade for any stock.
To simplify things, these grades are just like what you’d see in a school.
A stock with the highest growth and business quality ratings gets an “A.”
A stock with miserable ratings gets an “F.”
The result of all this work? My readers buy the world’s fastest growing companies… and hold them through their most successful years of expansion.
But as I mentioned at the start of this essay, my accident led me to discover a way to make large profits in stocks not over “years” of growth, like I was accustomed to… but through the specific days and weeks that the absolute best companies enjoyed compressed periods of hypergrowth in the share price.
During these periods, elite growth stocks can double and triple in value in a matter of months. In tomorrow’s essay, I’ll explain how to find them — without taking big risks. It’s more than possible once I show you what to look for.