3. Price Momentum: Some stocks are stuck in a rut with no escape. You do not want to own one of these. I know of many stocks that have traded within a narrow range for 10 years or more. With such a small chance for upside potential, the threat is always looming of being blindsided to the downside.
For this reason, I don't like having these "tapped out" stocks in my portfolio. What causes a stock to get stuck in a rut? Obviously, companies with no growth belong in this category, but what about a market-share leader?
Unfortunately, most market-share leaders are not great stocks to own because they have already reached the top. A company with nowhere to go but down represents a bad stock pick.
4. Expectations: Wall Street has turned into a game of analysts trying to estimate quarterly earnings data and companies striving to meet or beat those estimates. When a company can beat expectations, the stock benefits to the upside. The analyst community has become so sophisticated in its methods of projecting future earnings, that it has become more and more difficult for companies to deliver. Find a company that consistently exceeds expectations.5. Uncertainty: The future by definition is uncertain. Investors hate uncertainty, and yet it is inherent in the system. So the key is to find stocks with positive uncertainty rather than negative uncertainty. What is positive uncertainty? Positive uncertainty arises when a company shows a trend of innovation that leads Wall Street to believe that more success might be around the corner.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV