Checklist of “The Next Apple”

Presenting a Investment Checklist from the Book “The Next Apple”

Investment checklist

The company should not have a very big base, and it should not be the market leader of the previous decade

Go after stocks from hated, ignored, or boring industries when they clear new all-time highs from a proper base. In this case, perceptions are worse than reality. Low expectations and new highs create a powerful combination

Go after stocks from the hottest industries at the time when they clear new all-time highs from the proper base

Invest in the company which product you love, and you use regularly, and you see people becoming crazy about it, but when you find that stock in 52-week high list

Invest in stocks from the 52-week high list,

  1. When a breakout from a proper base is accompanied by a report of accelerating earnings growth that is better than expected
  2. When a breakout is in a currently hot industry

Avoid stock hitting 52-week low in the bull market

Note stocks hitting 52-week low in a bear market, and wait for them hitting new 52-week high

Invest when you find a combination of 52-week high + high short interest + very negative sentiment (hated stock or hated industry)

When there is a market correction,

  1. Stocks that show relative strength during major market pullbacks become the leaders of the next rally
  2. The first stocks that break out to new 52-week highs after a six- to 12-week correction  often outperform substantially during the recovery

The best time to get aggressive and put money to work is right after a market correction – 10% fall in the market index

There is a divergence when an index makes new correction lows, while a smaller number of its underlying stocks make new lows; and when stocks breaking out 52-week highs during a market correction, they tend to outperform after the market correction

Exit strategy:

  1. Exit when price poorly reacts to good news
  2. Exit when the stock falls 5% in a single day, as it is an indication of institutions selling the stock or transfer of ownership
  3. Exit when it looks overbought – look at RSI
    • Is it a fresh breakout from a humongous base? Have earnings just accelerated? In this case, an overbought condition is likely to be the beginning of a powerful new trend, not the end
    • Is the stock already up more than 800% in the past three years? Do most analysts have a buy rating on the stock? Is the institutional ownership above 90%? Are the CEO and the company featured on the first page of magazines, newspapers, websites? In this case, a severely overbought condition is a good reason for partial profit-taking
  4. Exit when there is an end of a trend when there is
    1. A lower low – closes below the most recent time consolidation
    2. A new 50-day low
    3. The price closes below 100dma
    4. The price closes below the 50-week moving average
    5. Exit when your stop-loss is hit

Published by Aakash and Meet

I am Aakash Raotole I am currently doing Bcom from Dr. Patel and Rb Patel commerce college I am currently studying at finnacle investment academy Recently done distance internship with windrose capital, Pune - for a period of 14 weeks I am Meet Bhatt Completed HSC in commerce Now studying finbridge program at finnacle investment academy and Bcom externals I had completed CFA institute's investment foundation course and distance internship with Windrose capital, Pune - for a period of 14 weeks

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