Follow the Smart Money Crowd to Better Stocks
One of the most tried and true paths to investment success is following the “Smart Money”.
As you already know, the Smart Money crowd are the folks with an inside track to a stock which gives them a serious investing edge. That list includes:
- Corporate Insiders
- Wall Street Analysts
- Hedge Funds
The Zen Ratings makes it easy to take advantage of the Smart Money crowd as we have found 14 proven factors of their activity that leads to share price outperformance.
These 14 factors are combined into our Sentiment component rating where the A & B label points out the top 20% of stocks enjoying healthy attention from these wise investors.
Let’s dig in a bit more into some of the specifics that helps drive the outperformance found in the Sentiment rating.
Insider Action: There is no denying how beneficial it is to know what insiders are doing with their own companies stock. Remember that the bulk of insider compensation is from corporate stock.
So for these insiders to reach into their own pockets to buy even more shares is a tremendous tip off that they are supremely confident in more growth ahead for the company that will drive up the share price.
Earnings Estimate Revisions: I spent 19 years at Zacks Investment Research where the central thesis was that earning estimate revisions by Wall Street analysts was the most telling indicator of future stock performance.
Rising estimates = the future looks brighter with earnings prospects on the rise, thus increasing fair value and attracting more investors to the shares.
Falling estimates = the opposite of above. That the future outlook is growing dimmer leading to lower earnings…lower fair value…and lower share price.
There is good reason why earnings estimates are in just about every reliable quant model for stock picking. That is why I insured it had a strong presence in the Zen Ratings to help zero in on the healthiest stocks (and yes, to avoid the worst stocks based on their earnings outlook).
Short Interest: Large hedge funds pride themselves on understanding the dynamics of a company more than anyone else. Their favorite treat is finding accounting issues with a company that come to light later and destroy shares.
This leads to a ripe shorting opportunity and why it is unwise for you to own shares in a company with a large short position stacked against the company as history shows that the shorters are usually right.
Our monitoring of short interest activity ensures that we avoid stocks with high short interest. And yes, very low short interest is something that increases the odds of share price outperformance.
In all there are 14 different factors inside the Sentiment rating. The 3 elements above being the most beneficial areas worthy of discussion.
Please read on to figure out how to use these valuable Sentiment ratings to improve your stock picking success…
What to Do Next?
1- Review all of your stocks to make sure they make the grade with the Zen Ratings.
Not just A and B rated overall, but how they stack up for the Sentiment component. A and B is preferred. But C is OK. It’s the D’s and F’s we need to avoid.
Just go to WallStreetZen.com and use the search box to review your stocks 1 by 1.
2- STRONGLY consider selling those stocks that don’t measure up. That’s because history shows poor ratings = poor performance.
In this regard, a low Sentiment rating (D or F) increases the odds of owning a losing stock.
3- Find Better Stocks. Continue your search of stock tickers on WallStreetZen.com to add more with the best Zen Ratings and Sentiment grades.
Note that today there are 920 A & B overall rated stocks. 405 of them are also A & B for Sentiment. To get you started on the right path, here are 3 top stocks that check both these vital boxes:
4- Discover my Zen Investor portfolio where I hand pick the best stocks based on their Zen Ratings and my 44 years of investing experience.
Currently there are 16 top Zen Rated stocks in my portfolio. No doubt many of them will be appealing choices for your portfolio.
Especially because I am a big fan of Sentiment indicators and always look for those with rising earnings estimates and low short interest.
This emphasis has helped the Zen Investor portfolio strongly outpace the market to start the new year and expect to keep increasing that lead in the months ahead.
Discover the Zen Investor & My Top 16 Stocks Now >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
Editor-in-Chief of WallStreetZen
What to Do Next?
Want to get in touch? Email us at news@wallstreetzen.com.
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