Are your stock ideas reliable like clockwork?
It feels good. But it’s not always easy. I guess that’s why people have been asking, “How do you find reliable stock ideas?”
And it’s a good question.
But if you’re looking for valuable investment ideas here’s another question you need to answer for yourself first:
“What Makes Stock Idea Reliables (For You)?”
You see, we’re all a little different (okay, a lot different). And that doesn’t just go for personality. It applies to your stock ideas, too. You need to know what you’re looking for. So get comfortable with your stock idea assessment methodology.
(Whatever that might look like…)
You might be a short term day-trader. Or maybe you’re a life long buy and hold investor. Me? I’m somewhere in the middle. And (since I’m such a nice guy) I’ll tell you what reliable stock ideas look like for me…
“I look for a margin of safety when I’m investing.”
Hedge fund managers have written on this concept of safety, ad nauseam. There are hundreds of books on the subject of value investing. So I’ll keep it brief. The main point you need to keep in mind is, you only buy undervalued assets with strong cash positions and minor debt.
You want to find equity issues trading below book value per share. You want to ensure current ratio is above 2 (at least) and you want to see a history of steady earnings.
You want to understand why the stock is trading at it’s current price. Read a few conference calls and any news stories you can find to get familiar with how much growth is priced in. Understand the narrative around the companies’ growth story, and ask, “how does all this relate to current stock price vs. expected future value?”
At least, that’s what I look for. On the other hand…
You might be a trader focused on near term support and resistance, or the slope of the nearest moving average. Whatever gives you peace of mind is the indicator you should use. The important thing is to define your concept of “reliable stock idea,” before you start buying stocks. Got it?
Now here are my favorite ways to find reliable stock ideas…
“Two Keys To Finding Reliable Stock Ideas:”
1) Never Waver on Your “Reliability” Criteria:
It’s simple on paper. But sticking to your guns requires conviction and can be emotionally difficult (especially when the market is moving against you). Plus, the investment universe is full of tempting new stock picks that are bound to get you craving easy returns. But please…
For the love of bacon-grilled cheese sandwiches…
You just need to stick to your stock evaluation criteria. And never deviate. That’s the key. Invest on your own terms. (And know what your terms are).
Now for reliable stock idea number two…
2) Research Lots of Stock Ideas:
As you’ve seen before, stock screeners are a great way to kick-start your research for reliable stock ideas. Just plug in any of your valuation criteria. Then, you can sort and sift your stock ideas any way you like.
Most of my filters are fundamental in nature. But you can use technical analysis criteria to refine your screen, too. Maybe you want to find stocks at 52 week lows, or those breaking trend line resistance.
But stock screeners are only a starting point…
My Favorite Source of Reliable Stock Ideas:
When it comes to finding reliable stock ideas, two heads are better than one. So the more brains you can tap, the merrier. Comb your Stocktwits followers, your favorite finance blogs and newspaper headlines for interesting stock ideas.
The more diverse the better…
Write down all the tickers you see – and feel free to annotate why they caught your eye. Leverage the legwork other traders are doing to speed up your stock idea research. A head start goes a long way.
Cross-reference the stock ideas you found with your pre-defined “reliability indicators” (as discussed above). The reason is, other people evaluating stock ideas are looking at different time frames, price targets and market indicators. That’s what makes a market.
And you’ll quickly find…
Most of the stock ideas your lift from other peoples stock idea watchlists won’t meet your criteria. But those few stock ideas that do make it through this analytical gauntlet will be a gem of money-making opportunity! Why?
First, these stocks will feel reliable given the criteria you are comfortable with. So you’re already winning. And second, these tickers are flashing on the radar of other traders (maybe because it crossed a moving average or it is breaking to new 52 week highs).
Thus in addition to your own reliability criteria, the factors that are attracting other traders will act as an even greater tailwind for stock prices. Make sense?
It sounds simple, but that’s how I’ve consistently found the most reliable stock ideas. What do you think?
Where do you find your most reliable stock ideas?
If you find yourself short on stock ideas, sign up for email updates below to get exclusive trading ideas available only through email.