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Big Trends How to Find Them, Ride Them and Get Off

Howard Lindzon
Founder and CEO of StockTwits @howardlindzon

Ivaylo Ivanhoff
@ivanhoff

howard@lindzon.com
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Finding Big Market Winners


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The Harsh Reality

in 3 Stocks Eventually Decline 75% from Their IPO Price;


1 in 4 Stocks Outperform the S&P 500 during their lifetime

Only

Stock Picking Matters

Where to Find the Winners?

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What Do big Winners Have in Common?


Many

of them have explosive earnings and sales growth; Many had new product/service that was loved by their customers; Many looked expensive on the way up (and paradoxically cheap on the way down)

But
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All Big Stock Market Winners


Spend the Majority of Their Time on the 52week high list (and better yet, the all-time high list)

Substantially Outperform market benchmarks in good and bad times

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Price Is the Most Important Part of Catching a Trend

It doesnt matter how smart you are; how ingenious your investing idea is; Until the market agrees with you, you wont make a cent. Market agrees with you, when you see your stocks on the 52-week high, better yet the all-time high list;

The 52-week high list is a raw data point, which could be enormously useful if you know how to read it properly.
The 52-week high list is basically a short-cut into the minds of people, who can create and sustain trends.
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U.S. Housing Recovery Is the Market Story of the Year and It was Told by the 52-week High List Long Before It became front-page news
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The Magic Of Relative Strength


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Relative Strength
How

A Stock Performs Against the Market;

Stocks

That Are Holding Near 52-week highs and Even Better, Break Out to New Highs While the General Market Is In Correction Mode, Are Likely To Become the Leaders of the Next Rally

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Trades Near 10-year High while Market Is In a Free Fall

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Makes New All-Time High while Market is in Correction Mode

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New All-Time Highs While Market is Making New 3-month Lows

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In Good Markets, There Will Be Hundreds of Stocks Hitting the 52-week High List Daily. You Cant Own Them All. How to Choose from such Big Pool of Stocks?

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The St50 List


The purpose is to Improve the Odds of Finding the Next Big winners.

It Saves Research Time By Ranking All Liquid Stocks by the Criteria that Matters:
-Distance

from 52-week high; -Relative Strength; -Earnings and Sales Growth; Acceleration in growth; -Earnings Surprises; -And Most Importantly Setup score (based on Moving averages ratios), which keeps us away from extended stocks.

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But There Is More to the St50 List Social Data


You Could See Which of the Strong Momentum Stocks Are: Least followed = no one pays attention to them; there is no hype; Least mentioned = undiscovered gems with a lot more potential to appreciate; Gaining social momentum.

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Momentum In All Markets Is Interconnected


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A Glass Half Full


No matter what is going on in the world, there will always be companies that will manage to monetize on an undergoing social or business trend. If you follow the 52-week high list, and better yet the StockTwits 50 list, you will know the ones that are truly ripe to be owned

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Ride Them Long Enough To Make a Difference

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Holding Is An Important Part


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Starbucks Might Be the Next Starbucks


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Trend Following Is Not for the Faint of Heart and Get Rich Quick Dreamers
Anybody Can Buy A Stock, but You Also Have to Hold It While It Rises In Order to Make Money

Dont Sell Until A Stock Gives You A Reason

And Yet, Conviction Without Discipline Is a Recipe for DisasterYou Have To Stick To Your Sell Rules, No Matter How Much You Believe in the product/service
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Pruning Is Important. You Will Have Losers. Get Rid Off Them

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How To Get Off

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Have An Exit Strategy


Some Trends Last Longer Than Others, But Sooner or Later They all Come To An End

Everything Is For Sale At the Right Price No Gain Is Really A Gain Until It is Booked

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80/50 Rule

80% of All Big Stock Market Winners Lose 50% of Their Move

50% of All Big Stock Market Winners Love 80% of Their Move

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I can calculate the motion of heavenly bodies, but not the madness of people.
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Why Trends End


No company can sustain high growth forever; No company can sustain high expectations forever. Anything priced for perfection eventually disappoints Valuation Matters When Markets Mood Shifts from Complacency and Euphoria to Doom and Gloom

Wall Street is a tireless printing press; sophisticated distribution and marketing machine. It is in the business of printing stocks that are under demand by the market
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Partial Profit Taking


Too

Extended from Its Rising 200dma (40%+)

Reacts

Poorly to Good News

Look

for Sudden Increase in Short-Term Volatility. It is often a sign of ownership transfer from strong to weak hands

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