How To Identify Good Performing Stocks Quickly?

Kathy

Today we will be sharing with you one simple way to identify how a good performing stock looks without first having to look at the numbers. You do not have to be reading stacks of research reports or rely on hearsay which most of the time are not exactly helpful.

You simply take a look at its price chart over a 5 year period using the daily candles. You can head over to stocks charting platforms or even web-based one like Yahoo Finance.

A good performing stock will consistently break new highs over time. You will see that it makes higher highs and higher lows. Yes you heard that right. Higher lows as well. No stocks move in a linear fashion without retracements. If it does, you better examine closely why it is so and make sure that it is not a pump and dump scheme. (Note that we are looking for a general uptrend over a longer period of time. In the short term, good stocks will have their own bear markets as well.)

You can take a look at the charts of companies like Microsoft, Google and Nike. Do you see the same patterns of higher highs and higher lows?

That said, this should ONLY be used as the first criteria when screening a good performing stock. Do not use this method solely to make your buying decisions. But you can use this method to filter away many stocks in your consideration list immediately.

Personally, I have been using this method since I started investing and this little screen time helps me to immediately filter away companies that are not worth my time to dig deeper. In all likelihood you will find that the majority of the companies will not even pass this initial screening.

Think logically, if a company does not continue to make new highs over the past 5 years, what makes you think it is going to do so in the upcoming ones? While past performance is not indicative of future performance, I would like that a company has a good track record of doing what I would want to see them do first. The charts never lie. Success always leaves clues that an investor can pick up from easily.

About Kathy

Co-Founder of The Joyful Investors and Manager of The Moneyball Portfolio. I graduated with a degree in Economics in National University of Singapore (NUS). My previous experience with traders at the Merrill Lynch enable me to realize many counter-intuitive truths about how the financial markets work and to uncover the challenges faced by many new investors. We believe that investing can be astoundingly simple and want to make financial education understandable for everyone.

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