After Opinions What Next?
This is part two of nine in a series of the best route for investing success. The first one had to do with seeking “advice” from various online resources, focusing on Fidelity Investment’s Equity Summary Score and the tools that Seeking Alpha offers. Now we want to talk about speed.
When you are driving from one place to another using a GPS you can choose between slower roads and those with a higher speed limit. While the higher speed limit is no guarantee of an earlier arrival time, it can often help you know which route is best for your needs. Current trends on the road can help you pick the right route. The same is true for investing. The Rule of 72 is certainly one long-distance formula for success. However, there are other metrics you can also see in graphical form.
Number Two: Current Trends
When I am looking to buy stocks to add to our portfolio or stocks that I might use to trade covered call options, I don’t want to select stocks with little price variation, and I generally don’t want to buy stocks when the price for each share is falling. It is better to find investments where the price is accelerating. It is best to buy an investment where the price is climbing the hill faster than the price of other investments. Upward price momentum matters for both the short-term and the long-term journey.
Buy Stocks with Upward Price Momentum
One of the components of the Seeking Alpha QUANT score is “Momentum.” Many novice investors would shy away from buying shares of MU (Micron Technology, Inc.) because the price per share is $776.01. Rather than buy one share of MU they will buy 100 shares of something that costs $7 per share. Seeking Alpha can help you avoid that wrongful thinking. The price per share is the market’s way of telling you if something is valuable and in demand. On it’s own it doesn’t really indicate true value.
Let’s take UMH as an example. UMH Properties, Inc has a momentum score on Seeking Alpha of D+. The current share price is about $15/share. You could buy 50 shares of UMH for less than the price of one share of MU. However, UMH has no real opportunity for positive price momentum. If you buy UMH for total returns you are going to be disappointed.
Two Examples for Options Trading: NVDA and CRDO
I own shares of NVDA and CRDO. These are NOT dividend income stocks. Credo Technology Group Holding Ltd does not pay a dividend, but the current momentum score is B+. NVIDIA Corporation pays a dividend, but it is laughable with a micro yield of 0.02%. I don’t know why they even bother with that dividend. However, NVDA’s momentum score is B.
Seeking Alpha
In my previous post I said I connected our eight Fidelity Investments accounts to my paid Seeking Alpha subscription. This gives me a lot of useful information, including a high-level view of the quality of our investments by account. Because my Traditional IRA is our largest account in total dollars, I chose that one for this illustration.
This resource helps me see “How Healthy is Your Portfolio.” The ratings are being provided for information purposes only. Strong Buy, Buy, Hold, Sell, Strong Sell ratings do not constitute a specific call to action or advice for any individual to buy, hold, or sell a certain stock. However, they can be informative. Another metric is the “Your Dividend Safety Score.” Here is an image that shows both.
Summary
Momentum can be a helpful consideration when you are buying any investment. I’d rather buy one share of a $1,000 stock with upward price momentum, than 100 shares of a $10 stock that is going nowhere. Ask yourself, “Is my advisor wise?” There are many who are not. Look at the investments in your portfolio. Ask this question: “What is the momentum? Will it result in a good Rule of 72 number?”
Proverbs 13:20 “Whoever walks with the wise becomes wise, but the companion of fools will suffer harm.”
Seeking Alpha Subscription Information
Of all of the resources I use, the most helpful is Seeking Alpha. The Seeking Alpha QUANT rating is a huge factor in my investment success. If you decide to explore a Seeking Alpha subscription, please use the following link. Seeking Alpha
SEEKING ALPHA INFORMATION AND SUBSCRIPTION
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All scripture passages are from the English Standard Version except as otherwise noted.
Know Your Flocks & Herds 