recommendation. Just know that if you buy a stock based on your own research, and analysts subsequently rave about it, your stock price is likely to go up. A single recommendation by an influential analyst can be enough to send a stock skyward.
Newsletter recommendations: Independent researchers usually publish newsletters. If influential newsletters are touting your choice, that praise is also good for your stock. Although some great newsletters are out there and they offer information that’s as good as or better than that of some brokerage firms’ research departments, don’t base your investment decision on a single tip. However, seeing newsletters tout a stock that you’ve already chosen should make you feel good.
Consumer publications: No, you won’t find investment advice here. This one seems to come out of left field, but it’s a source that you should notice. Publications such as Consumer Reports regularly look at products and services and rate them for consumer satisfaction. If a company’s offerings are well received by consumers, that’s a strong positive for the company. This kind of attention ultimately has a positive effect on that company’s stock.
Making sure a company continues to do well
A company’s financial situation does change, and you, as a diligent investor, need to continue to look at the numbers for as long as the stock is in your portfolio. You may have chosen a great stock from a great company with great numbers in 2018, but chances are pretty good that the numbers have changed since then.
Heeding investing lessons from history
A growth stock isn’t a creature like the Loch Ness monster — always talked about but rarely seen. Growth stocks have been part of the financial scene for nearly a century. Examples abound that offer rich information that you can apply to today’s stock market environment. Look at past market winners, especially those during the bull market of the late 1990s and the bearish markets of 2000–2010, and ask yourself, “What made them profitable stocks?” These two time frames offer a stark contrast to each other. The 1990s were booming times for stocks, whereas more recent years were very tough and bearish.
Pick a company that has strong fundamentals, including signs such as rising sales and earnings and low debt. (See Chapter 4 in Book 3.)
Make sure that the company is in a growing industry.
Fully participate in stocks that are benefiting from bullish market developments in the general economy.
During a bear market or in bearish trends, switch more of your money out of growth stocks (such as technology) and into defensive stocks (such as utilities).
Monitor your stocks. Hold onto stocks that continue to have growth potential, and sell those stocks with declining prospects.
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