Momentum Investing

[Michael]

I stumbled over this white paper about Momentum Investing and thought I would share it with the rest of the 3SOF community.

I think we have a few candidates for the list: VPHM, AOB, KOMG and hopefully CKCM, SVA and BRVO in the future!

Momentum Investing

Profiting by Knowing When Stocks Are Going to Soar
An Investment U White Paper Special Report

By Alex Green, Investment Director, Investment U, The Oxford Club


Take a penny, double it every day for 30 days... and it's worth over $10,700,000. (If you doubt it, grab your calculator.)

That's the awesome power of money compounding. And it's this type of extreme moneymaking that attracts certain investors to a particular class of stocks known as momentum investing: the fastest-growing companies - and the most rapidly moving stocks - in the market.

There's nothing mysterious about them. They simply lead virtually all other companies in terms of sales growth, operating margins, profitability and relative strength.

Many of the best-performing stocks of the past—the ones that have turned $10,000 into more than $1,000,000 for hundreds of investors—are businesses you've been patronizing for years. Have you or your spouse ever shopped at Wal-Mart? The company's shares rose 40,232% during the last bull market. That's enough to turn $10,000 into more than $4 million.

Have you or your company ever bought a Microsoft software program like Word, Excel or PowerPoint? The stock rose 61,034% in the 13 years following its IPO. That turned a $10,000 investment into more than $6.1 million.

Have you ever used your computer to log onto the Internet? The biggest maker of routers and switches for Internet connections is Cisco Systems, which rose 95,667% in the 1990s alone. A $10,000 investment made here would have allowed you to spend the rest of your life sitting on tax-free bonds. Because $10,000 grew to an astonishing $9.56 million in less than 10 years.

Unfortunately, Wal-Mart, Microsoft and Cisco cannot possibly generate these kinds of returns in the future. They're much too big to grow at that rate now.

The Key to Making Momentum Investing Work

Making a fortune in a short time requires investing in the most rapidly growing momentum companies today... so you can enjoy a life of total financial independence tomorrow.

In this white paper special report, you're going to learn exactly how to identify these superlative companies before they begin to soar, turning $10,000 into $1 million or more. And you're going to learn not only when to buy them, but exactly when to let them go... so you can capture magnificent profits along the way.

Best of all, you're going to find that owning these companies carries less risk than you imagine.

Don't get me wrong. Buying troubled or mediocre companies is very risky. But buying superbly managed, rapidly growing companies with double- or triple-digit growth rates, high returns on equity, and strong share prices is not.

Let me show you exactly how to identify these companies before they arch skyward, and how owning just two of these stocks can turn $10,000 into $1 million.

Turn a Grub Stake Into a Small Fortune

It boils down to pure mathematics. If you invest $10,000 in one stock and it rises 10-fold, you now have $100,000. If you then take that money and reinvest it in another stock that rises 10-fold, your $100,000 will be worth $1 million. It's a mathematical certainty.

How difficult is it to find a stock that rises 10-fold? If you know what you're doing, it's not that hard. Ever shop at Best Buy, for example? It recently rose more than 30-fold in five years. And there have been dozens of other great-performing growth stocks... even in the vicious bear market of the past three years. For instance, Ultra Petroleum, Lannett Company, Headwaters Inc. and Multimedia Games have all risen more than 14-fold in the last three years. Alliance Gaming has risen more than 29-fold in the past three years...

Each of these stocks has given investors a moon shot. And each is what professional investors call a "momentum stock."  Quite simply, momentum investing, by definition, occurs when a company shows dramatic gains in sales, earnings and share-price movement.

Yet you probably don't own them. In fact, when you look in the paper and run your finger down the list of the market's biggest percentage gainers - the momentum stocks - you may find you don't own a single one of them. You're not alone.

Most individuals don't have a clear idea how they're going to achieve a legacy of great wealth. The desire is there... but the results often come up short. And as Yogi Berra once remarked, "If you don't know where you're going, the chances are you won't get there."

In our view, the key to achieving great wealth - the kind of wealth where money is no longer an object, where you leave a real legacy to your children and grandchildren - is to follow a system that gives you the statistically highest probable chance of success.

That's the key. To build great wealth, you need an investment system that is battle-tested and proven to perform in all economic and market environments.

Owning the fastest-growing companies - momentum investing stocks - allows you to do that. It's a common-sense approach to investing that works in good markets but, as you'll soon see, in bear markets, too. It doesn't depend on what the market averages are doing. Or whether your fund manager is on or off his game. It just takes identifying the right stocks - momentum stocks - something we do every day.

How to Build Your Fortune Quickly, Consistently... And Methodically

How do you identify the momentum investing stocks - the ones that will turn $10,000 into $1 million - before they make their historic moves up? The answer is almost too obvious.

If you were an engineer in charge of building an important bridge, how would you go about it? Would you try something new and different? Would you try to build a bridge based on untested ideas or drawn from a plan never seen before?

Absolutely not. You would build your bridge to the most exacting specifications. You would use the strongest materials, the most rigorous plans, and the most qualified people to build it.

A blockbuster investment portfolio is constructed the same way. If you understand that the best-performing stocks in the future will be the fastest-growing companies, with the greatest leaps in profitability and the strongest price action in the market, why not invest exclusively in these stocks?

If you're like many investors we speak with, we already know your answer: You're not sure which companies these are.

Fair enough. But following our analogy about the way to build a bridge, how do you go about identifying the companies that are likely to show the biggest gains in the market?

The answer is plain. You go back through history and make a thorough, systematic study of every stock that ever gave fantastic, 10-fold or better returns.

You see what unique elements they all had in common. And then you seek those same elements in the stocks available today.

During the '90s, for instance, Clear Channel Communications went up 5,615%. Emulex rose 6,412%. Dell Computer went up 10,198%. Activision went up 13,819%. Semtech rose 15,231%.

These stocks made multi-millionaires of many investors. Just as other momentum investing stocks will in the future. You can be one of them. Here's all it takes.

First you pinpoint the characteristics that all these stocks shared before they skyrocketed - and there are only a few. Then you carefully screen all the publicly traded companies available for purchase today.

You isolate the handful that share these criteria and are, therefore, likely to rise 10-fold or more. Then you invest in this select handful of stocks... and wait.

It won't take long before your portfolio starts to act like a pan full of Jiffy Pop. Because if history has demonstrated anything, it's that ultimately share prices follow earnings. But not earnings alone...

The Big Winners of the Past Will Help You Identify the Big Winners of Tomorrow

While these are averages, based on the big movers of the past, here are a few of
the factors that will help you identify two momentum investing stocks that will turn $10,000 into $1 million:

• They have annual earnings growth of at least 24%
.

• The average percentage increase in earnings for the current (or, in these
  examples, the preceding) quarter is at least 34%.
• They have a P/E ratio of 31 or more.
• They have a relative strength rating of 85. (That means they are already
  outperforming 85% of the stocks in the market before they make their big move
  up.)
• Their relative strength has been growing for at least the past six months.
• They have an average of at least 5 million shares outstanding.
• They have average daily volume that exceeds 75,000 shares.
• Their industry group is in the top 30% of the market.
• They have a median stock price of $26.
• When you boil it down this way, it may seem as though the process is purely a numerical exercise. But, like most things in life, it's not that simple.

1. You must know exactly how to apply those qualifications to different sectors of different industries under different market conditions.

2. You have to have access to a proprietary database that contains the relevant data on more than 9,000 publicly traded companies.

3. You have to be qualified to interpret the mountain of quantitative and qualitative information that you uncover. That often takes years of experience.

4. Even if you have the knowledge, the skills, the contacts and the money to ferret out these few stocks, you will need to spend hundreds of hours screening all the potential candidates.

Many investors just don't have that time - or quite frankly - the ability to see the things a trained expert can detect.

Fortunately, Alexander Green does.

Your Biggest Ally In the Battle for Financial Freedom

Alex is the Investment Director of The Oxford Club and he relentlessly tracks down momentum investing stocks and recommends the best ones to Oxford Club members. And he does considerably more than that, providing investors with a window on the market's most successful momentum stocks... and the incredible short-term profits that come with them.

A Wall Street veteran with more than 16 years' experience as a research analyst, investment advisor and professional portfolio manager, Alex's managed accounts delivered blockbuster returns. In fact, he retired from Wall Street at the ripe old age of 43. 

He now oversees The Oxford Investment Portfolio and runs three elite trading services. One of them, The Momentum Alert, is dedicated to exactly the kind of momentum investing plays we've been talking about. His knowledge, experience and contacts allow him to target the most successful companies in the market. The ones that are well on their way to becoming this year's biggest percentage-gainers. The ones that can turn $10,000 into $1 million for you.

[stocky]

Applaud.

Does GOOG comes to your mind as one such stock? Leave aside its current cap, but focus on the growth and innovation.

[Michael]

Hi Stocky,

First of all thanks for sharing your diary with the rest off us!

I have to admit that GOOG didn't come to my mind when I read the paper. That is however most likely because it is not on my watch list. It certainly seem to fit most of the criteria

• Their stock has performed exceptional
• They have grown revenue from 439 million to 3 189 million from 2002 to 2005 and profit from 99 million to 399 million.

I don't know enough about the stock to give a recommendation but it seems like it is worth a look!

Mike