This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Why It's a Stock-Pickers Paradise

NEW YORK (The Street) -- Investors who have seen returns hinge on central bank chatter and macro events can take a breather: the stock-pickers market is back.

As fears around Europe's economic stability and a sharp slowdown in Chinese growth recede, the direction of stock prices is increasingly driven by earnings quality and other fundamental factors. Check out the chart below, which shows stock correlation nose-diving. 

For investors, this spells a far stronger relationship between the quality of a company and its share price, rather than second-guessing central bank moves. It also means greater differentiation between individual stock prices and general market direction - in other words, less of a free ride from guessing macro-movements with solid rewards for research.

Yet against this backdrop, stock-pickers are feeling the heat from a rise in company valuations. After a run of 26% for the S&P 500 last year, bargains are thin on the ground, with several fund managers expressing skepticism that heady valuations will be justified over the coming 3-5 years.

Smaller companies are more expensive than their larger peers, following a 38.8% return for the Russell 2000 in 2013 while the Russell Microcap Index jumped 45.6%. Despite this, managers say there is still plentiful opportunity among smaller stocks:
(Isis, Teledyne and Pandora Among Top Small-Cap Picks)

In the absence of clear internal factors to justify higher stock prices, investors may well seek companies ripe for merger activity or agitation from activist investors. Those with high cash balances will be increasingly pushed to invest - or return funds to shareholders.

-- By Jane Searle in New York

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,880.74 -34.33 -0.20%
S&P 500 1,960.36 -4.32 -0.22%
NASDAQ 4,392.86 -3.3440 -0.08%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs