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Profiting from stocks of well managed companies

If the investor is seeking aggressive returns, they want to look at momentum stock investing. This type of investing refers to putting money in stocks whose price is rapidly rising. Fundamentally, earnings are strong and are being revised higher. Technically, the charts indicate that the stock price is climbing higher on growing volume. As long as the news from the company continues to be positive, investors will continue to drive up the stock price.

Momentum investing for stocks is not a buy-and-hold strategy. The investor must be ready to liquidate these stocks immediately. Particularly for momentum stocks nearing the end of its upward run, valuations on these stocks tend to be high. A company whose stock is priced at lofty price earnings, they must continue to deliver better than expected financial quarterly numbers. Failing to exceed investors’ high expectations means the stock is very vulnerable to a huge price drop.

To successfully execute this type of investing, the investor must actively monitor their stock positions. Because prices for momentum stocks are subject to major price volatility, it poses more risks for the investor. They need to be ready to liquidate their stock positions if the company fails to perform as expected. Key to successfully investing in momentum stocks is to minimize losses.


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