NEW YORK ( TheStreet) -- Buying a stock on sale might be wise money management, but it doesn't mean that you have to wait for a sale to get a great price on an investment. As I have discussed before, investors can make money by predicting a stock will move still higher.
Previous price information can help you predict where a stock price may go in the future. And buying a stock above the moving averages can mean you are "going with the flow." Everyone who has studied how to invest knows that the "trend is your friend," unless it's about to end.
I have previously reviewed stocks that are breaking above or near their 52-week highs to find the ones I believe have the strongest investor risk-to-reward ratio.
Again, my filtering process includes:
- A minimum trading threshold -- This eliminates the thin stocks that keep so many up at night.
- Improving year-over-year results relative to the stock price increase -- We want plenty of reasons why the stock should continue to move higher.
- Analyst price targets that are higher than the current price -- We want others to believe the stock will continue to appreciate and to maintain the buying pressure.
- Limited insider selling -- Generally we want to see no insider selling. But because of compensation methods and diversification goals, some insider selling is acceptable. Management should have skin in the game.
- Low short interest -- I consider short sellers to be the smart money. There is no reason to bet against them when we have plenty of stocks to pick from.