Quick, name the six top-performing stocks of the past five years. Don't look at the next two paragraphs; just see if you can tick them off in your head. If you answered with names like Dell Computer, ( DELL) America Online, ( AOL) Yahoo! ( YHOO) and Qualcomm ( QCOM) you're close -- but not close enough. Instead, the top names are Xcelera.com, ( XLA) up 77,800% since Feb. 15, 1995; Internet venture-capital firm CMGI, ( CMGI) up 22,200%; fiber-optic network component maker JDS Uniphase, ( JDSU) up 19,800%; data-storage software specialist Veritas Software, ( VRTS) up 17,200%; anti-cancer biotech specialist ImClone Systems, ( IMCL) up 13,010%; and data-storage hardware maker QLogic, ( QLGC) up 13,100%. The fact that you may never even have heard of some of these companies is testament to how difficult it is for investors to comprehend lasting changes in stock momentum. You may have seen these symbols on the CNBC ticker crawl every day for the past few years at steadily rising prices without knowing that a tectonic shift of investor sentiment was occurring right before your eyes. The capacity for seeing the little weekly, monthly and yearly stock moves that lead to massive shifts used to reside solely with money-management professionals who had outstanding memories and were good at reading the tape each day. But today, any investor with access to a stock-screening engine can -- and should -- do the same. In this column, I want to share one way to use the Investment Finder screening software at MSN MoneyCentral to see shifts going on beneath the surface of the broad market. I'll offer many more ideas like it over the next few months. Later in this column, I also propose a new member of my "100x10y team," or stocks that could gain 10,000% in 10 years.
See the Action FirsthandTo view shifts in action, let's start with the New Highs list. Anyone who has studied the books of Investors Business Daily founder William O'Neil ("How to Make Money in Stocks") knows that this is a great place to hunt for strong stocks. But most newspapers have stopped carrying the list, and the fact that a stock has made a new high all by itself isn't so interesting. You'd like to know that it came on increased trading volume, and that it was accompanied by rising earnings estimates from brokerage analysts. A well-targeted screen like this -- which ultimately will narrow our list of stocks to research from nearly 8,300 to around 40 -- is easy to create in the Finder. I used the following criteria:
Company Basics/ Industry Name "display only."
Here's a link to the MoneyCentral Investment Finder that builds this
Sticking with the theories in O'Neil's books, you ideally would find your best plays in the strongest groups, so software, drugs and biotechs still look like good bets for the short term. As for the long term, well, rest assured that CMGI, Veritas and QLogic have showed up on this list many times over the past five years. You can investigate each stock further by right-clicking on the name in the Finder and choosing Company Facts, Newswire and SEC Filings. To narrow your choices further, though, consider adding other filters. For instance, eliminate stocks that aren't the subject of rising earnings estimates by brokerage analysts by adding these criteria in the Finder:
This final list is more heavily weighted toward the Semiconductor firms, largely because the analyst community follows it so closely. The largest three companies with both solid analyst and investor backing are PMC-Sierra, ( PMCS) GlobeSpan Semiconductor ( GSPN) and newly minted Silicon Image ( SIMG). The only other two groups that stand out are Network & Communications Equipment makers, led by Cabletron Systems ( CS) and Crossroads Systems ( CRDS); and Telecom Services-Foreign, led by Telefonica de Argentina, ( TAR) Mexican wireless giant Grupo Iusacell ( CEL) and Canadian wireless conglomerate Microcel Telecommunications ( MICT). Without doubt, the market has shifted emphatically away from last year's focus on pure Internet plays (with America Online and eBay ( EBAY), the poster children, each down more than 20% in the past year) and toward semiconductors, biotechnology, networking and wireless. It'll take years to learn whether the shift is strategic or tactical, but screening regularly for New High Screamers at least will help you uncover low-risk short-term trading opportunities while you're waiting.