Market Edge Prime Ideas


Market Edge Growth Stocks

Growth stocks are companies that are experiencing accelerating earnings and sales growth on a quarter to quarter basis as well as over an extended period of time. Understand that a company can boost its earnings per share (EPS) results by cutting costs, and occasionally, by divesting money-losing operations. But such strategies can go just so far. Over prolonged periods of time, strong rates of EPS growth start with strong rates of sales growth, which is why its inclusion in the formula is necessary to spot growth stocks early on in the process.

In order to qualify as a Growth stock the company needs to have the following characteristics:

  • The companies effective tax rate is greater than 24%.
  • The EPS (earnings per share) growth rate for the current quarter is greater than the trailing twelve month (TTM) EPS growth rate.
  • The TTM sales per share growth rate (SPS) is greater than the thee-year cumulative average SPS growth rate.
  • The TTM EPS growth rate is greater than the TTM SPS growth rate.

In addition to the above criteria, the following technical characteristics must be present:

  • The stock has a Long Opinion and the Score is greater than or equal to -1.
  • The Up/Down Volume Ratio is bullish.
  • The average daily volume is greater than 100,000 shares per day.
  • The ADXR reading is greater than 20, signaling a strong trend is in place.

Market Edge Momentum Stocks

Momentum stocks are turbo charged growth stocks. The earnings of these companies are growing at increasingly higher rates. Momentum stock investing can be very rewarding but be forewarned that it is also very risky. A bad quarter or negative earnings warning can see the stock's price plummet very rapidly.

In order to qualify as a Momentum stock the company needs to have the following characteristics:

  • The companies effective tax rate is greater than 24%.
  • The EPS (earnings per share) growth rate for the current quarter is greater than the trailing twelve month (TTM) EPS growth rate.
  • The TTM sales per share growth rate (SPS) is greater than the thee-year cumulative average SPS growth rate.
  • The TTM EPS growth rate is greater than the TTM SPS growth rate.
  • The price/earnings growth rate (PEG Ratio) is less than 1.

In addition to the above criteria, the following technical characteristics must be present:

  • The stock is rated as a Long.
  • The stock has a bullish Up/Down Volume Ratio.
  • The average daily volume is greater than 100,000 shares per day.
  • Relative Strength is greater than 1.04.

Market Edge Value Stocks

Value stocks are companies that are trading at a discount in the market relative to its future earnings potential. Typically these companies have had a series of problems, which has caused them to fall out of favor. The trick in selecting these stocks is to identify those whose problems were temporary, the core fundamentals of the company remain strong and the negative situation is turning around.

In order to qualify as a Value stock the company needs to have the following characteristics:

  • Price to earnings ratio (P/E) ratio well below that of the market.
  • The total assets of the company exceed $50,000,000
  • The price is less than 4 times the book value.
  • The current ratio is greater than 1.
  • The price to cash flow is less than 12.
  • The percentage of long term debt is less than 25% of the companies capitalization.
  • The price to trailing twelve months sales per share is less than 6.

In addition to the above criteria, the following technical characteristics must be present:

  • The stock has a Long Opinion.
  • The Up/Down Volume Ratio is bullish.
  • The average daily volume is greater than 100,000 shares per day.
  • The ADXR reading is greater than 20, signaling a strong trend is in place.

Market Edge Bottom Fishing Stocks

A Bottom Fishing approach is designed to identify stocks that have been beaten down for whatever reason and are trading at or close to their 52-week low.This can be a dangerous strategy since statistics show that the majority of stocks that are making new 52-week lows continue to make new lows as the company's troubles become apparent to the street. The ideal situation is to isolate stocks whose fundamentals are improving and are trading near their lows but have been under accumulation for a period of time as the smart money crowd establishes positions in anticipation of a recovery.

In order to qualify as a Bottom Fishing stock the company needs to have the following characteristics:

  • The Close is above 10.
  • The Close is within 20% of its 52-week low.
  • The current ratio is greater than 1.

The Market Edge "Prime Fish" also possess the following technical characteristics:

  • The stock has An Early Entry Long Opinion.
  • The average daily volume is greater than 100,000 shares per day.

Market Edge Short Sale Candidates

Short Sale Candidates are former Momentum stocks whose earnings have stopped growing at an increasingly higher rate. Investing in momentum stocks is risky since when the momentum reverses the stock's price can plummet very rapidly. Momentum stocks are great on the way up but once they disappoint they can become good short sale candidates.

In order to qualify as a Short Sale Candidate the company needs to have the following characteristics:

  • The EPS (earnings per share) growth rate for the current quarter is less than the trailing twelve month (TTM) EPS growth rate.
  • The TTM EPS growth rate is less than the TTM SPS growth rate.
  • The price/earnings growth rate (PEG Ratio) is greater than 1.

In addition to the above criteria, the following technical characteristics must be present:

  • The stock's Opinion is an Avoid.
  • The U/D Volume Ratio is bearish.
  • The average daily trading volume is greater than 100,000 shares per day.
  • The Relative Strength is less than .95.