In Bear Markets, Buy What’s Working

Cheap stocks can always be cheaper, especially when the market direction is bearish. And that’s why I don’t “dumpster dive” when I invest and why I don’t try to catch a proverbial falling knife.

If you want to decrease your risk and increase your probability of success, wait for an uptrend. If your investment thesis is correct, you can afford to be patient and wait for your moment. Yes, you will miss catching the absolute bottom. But again, that’s okay. No one consistently calls the exact bottom of a bear market… not you, not me and not even legends like Warren Buffett.

Today, let’s dig deeper into why momentum investing works. To understand this, we need to remember what the stock market is. This is not a black box machine. It’s a collection of millions of investors just like you and me, and each of us watches the moves of the others in real time.

Stocks rise because there are more buyers than sellers who offer a higher price. And the higher a stock goes up, the more attention it gets from other investors, which encourages them to join the party. These new investors, attracted by the rising price, push the price still higher, encouraging even more new investors to join the fray.

The basics also play a role here. A rising share price is a form of advertising. This can build awareness of the company, which encourages people to buy its products or services. A rising share price also allows the company to raise more expansion capital at cheaper rates, which creates a good cycle where the rising share price helps Factor Improve the basics instead of simply mirroring them. This is why high-momentum stocks are often high-growth stocks—at least in healthy bull markets.

Of course, all of this could backfire. Deteriorating fundamentals can cause the stock price to fall. When a company’s sales or earnings fall within analysts’ expectations, the stock price can usually be expected to fall. But a sharply declining stock price can as well Factor Deterioration of fundamentals by forcing the company to cut back on expansion plans. The virtuous circle can turn into a vicious circle, especially in a bear market.

The importance of holistic investments in the bear market

You need to consider technical factors, such as momentum, and fundamental factors, such as growth and value. And you need to consider how the factors influence and interact with each other.

In my Stock Strength Ranking system, I rank stocks based on three main technical factors and three main fundamental factors. It is objective and systematic – the numbers speak for themselves. But this is also only the first part of my analysis. I dig into the data to separate each of the six factors. I’m also looking for a big sustainable growth generator – or durable megatrend, as I call them – that I expect will support improving fundamentals and technicalities. And then I seal it by looking for that special “X-factor,” or that potential catalyst that the market is ignoring.

I find opportunities even in this nasty bear market. My last recommendation for me Green Zone Fortunes Readership is up 50% this year, and I believe it’s just getting started. The rising share price is supported by very strong sales growth, and the shares remain extremely cheap based on my value factor. discover more, Click here.

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