stock pickers and momentum plays

After nearly 2 decades of trading and watching the markets I am coming to the conclusion the 2 biggest factors of making money as a trader or as a longer term investor is the ability to Stock Pick and watch momentum.

That seems an obvious statement but is not the obvious part of this statement I am looking at that sems to make the difference.

From the stock picking point of view it doesnt seem to make sense picking "popular" picks or the ones every one else wants to play.


I am looking to firstly find the sector of the market i think has growth ,is neutral or is in a shrinking market.

When a stock is popular these stocks tend to have ressearch notes ,newsletters,chart pickers all on the long side tending to in my humble opinion price them higher than the natural market may normally value each of their business at.They tend to have investors super funds instos ,mum and dads and the taxi driver buying a stock many dont even know what they do as a business.It can often make people follow the herd of stocks in the wrong sectors only to see one huge fall when the markets and the instos come to their senses on what the actual business really is.

GLB is an interesting example of this.

What I mean by good stockpicking is to find stocks that are in my opinion in a growth sector and have had a period where they have been sold down,suffered bad management,coming out of bad cycicals,have large abnormals etc.or simply are to small or not followed by the big brokers or the masses

In my opinion AMP seems to be a clear case of this .

All of us are getting older,AMP is still one of the dominant players in wealth management yet,the momentum of the market as a result of its non core business saw it off the stock pickers ressearchers watch list and fall to 6.00

Everywhere you went it was gloom.

This in my opinion was the time to have a look at the stock to determine whether it was a Davnet and in a reducing growth market or whether financial services and wealth management was neutral or in fact a current growth market.

My feeling was that it was the latter and the rebound to $8.00 was justified.


At this level i dont have an opinion on the price of AMP but I do believe it meets the criteria i am trying to get at where the masses are still focussed on the ressearch notes to the down side,focussing on the FTSE rather than its real busines and so on and so on.

My point from all of this is to work out where to from here.

What are growth sectors,what is neutral and what is negative.

From this list I can then review each of the sectors to see if I feel their price is fair value .This task requires me to determine what the market is saying against my opinion of the sector.Following on from this one then needs to look at what companies within each sector I believe is under fair value will be the leaders.

Hard work YES but then and only then am I buying stocks that concur with my feelings of what is a good business at a fair price .

The weekend financial review is a good paper for this exercise at it lsits the companies by sectors and one can compare the sector pe averages against each other and then also the companies within these sectors against each other.

My growth sectors for what its worth are

Media
Financial services
Gold
Health