Finding a winning stock is rare, but when an investor discovers one, their investments could increase by hundreds of millions of dollars. But how do you pick a winning stock? What are some of the ways to identify companies that could become highly successful in the future? Here are some tips on identifying a stock that will increase in value and provide good investment over time.
How to pick a stock
Understanding the corporate activity within a company is as important as analysing its potential growth. Looking at how the company operates on the inside gives you a lot of insight into its value as an investment. Additionally, a company that is growing often goes through a lot of difficulties. It may be in debt or have one or several weak spots, but this doesn’t necessarily mean that it can’t become successful. If the idea or an aspect of the company is strong enough for it to survive and give it enough potential, it may still be worth investing in it.
It can also be a good idea to watch out for start-ups that are heavily funded that can benefit from the financial boost to develop into a popular brand.
Investing has become a lot easier since the internet has made it possible to trade on the global stock market. Trading brokers now use cutting-edge technology and offer low or no commission rates at all, making investments potentially lucrative. While trading can be highly risky and doesn’t always pay off, there are many different options available for those who are interested in becoming an investor.
CAN SLIM factors
CAN SLIM is one of the methods that investors use to identify when and if they should invest in a stock. This strategy was developed in the 1950s and is still considered an effective way to pick a winning stock today.
CAN SLIM is an acronym which encompasses seven traits that a stock should ideally have:
C – increasing current quarterly earnings,
A – annual earnings,
N – new product, service or management,
S – supply and demand,
L – leading stock in a popular industry,
I – institutional ownership,
M – market direction, trending.
Identifying great IPOs
When a company goes public, an IPO presents an early opportunity to purchase stock in a growing company, while some earlier investors may choose to sell their shares.
“Think of an IPO as the end of one stage in a company’s life-cycle and the beginning of another”, Forbes Advisor suggests. “Many of the original investors want to sell their stakes in a new venture or a start-up. Alternatively, investors in more established private companies that are going public also may want the opportunity to sell some or all of their shares.”
A company that grows gradually and steadily is usually much healthier than one that experiences a sudden spike in growth. Therefore, when identifying great IPOs it’s important to understand how the company has performed and how it is expected to perform in the future.
Reading about examples of successful start-ups and staying informed on the latest developments in business, technology and other sectors could give you an edge on finding the right company to invest in.