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The Potential Rewards of Investing in High-Performing Stocks
Companies that consistently show an upward trajectory in earnings, revenue, and share price often make it to the top stocks list. Such positive momentum is indicative of well-managed businesses capable of continually driving profits and enhancing shareholder value.
Investors can harness the power of stock screening platforms, like Finviz, to unearth these high-performing stocks. With a variety of fundamental and technical metrics at your disposal, you can find companies trading at 52-week highs or those consistently reporting heightened earnings over the past five years.
The Impact of Liquidity and Media Attention
Top-tier stocks generally attract significant media attention and are closely monitored by prominent Wall Street analysts. Consequently, this attention often leads to enhanced liquidity, resulting in improved pricing and expedited trade executions. Moreover, the high liquidity of top stocks makes it difficult for substantial players to manipulate them, thus maintaining market fairness and order.
Broadening Your Investment Spectrum for Portfolio Diversification
The versatility of stock selection criteria allows investors to venture into leading companies from various industries and sectors. This approach paves the way for an effectively diversified portfolio, helping to shield you from risks specific to any particular sector.
Understanding the Risks Associated with Top Stock Investing
The Threat of Missing Out
Exclusive investment in top large-cap stocks might result in missed profitable opportunities in the broader stock market. Significant gains often stem from small-cap stocks that are currently off the radar. For instance, an undiscovered biotech company could make a groundbreaking discovery, causing its stock price to skyrocket. Even if you're primarily focused on top stocks, devoting a part of your capital to other stock groups can prevent missing out on such unique opportunities.
The Peril of Trend Reversals
The saying "The trend is your friend" holds true until the trend changes. Large-cap top stocks, despite a history of earnings growth and value creation, can face unexpected obstacles. For instance, cruise line companies like Carnival Corp. and Norwegian Cruise Line Holdings Ltd. witnessed their revenue plummet to record lows due to the global health crisis, despite reporting revenue growth in the pre-pandemic years. When investing in top stocks, implementing a stop-loss order can help guard against abrupt trend reversals.
Recommended Stocks for July 2023
Promising U.S. stocks for July include Applied Digital Inc., TG Therapeutics Inc., and Immunovant Inc. These stocks have seen their share prices increase more than five-fold over the past year, significantly outperforming the Russell 3000's return of 14%.
Attractive Value Stocks
Value investing revolves around selecting stocks believed to be trading below their intrinsic value, often determined by comparing the stock's price to certain fundamental business metrics. The price-to-earnings (P/E) ratio is a commonly used value metric.
Proponents of value investing argue that if a company's stock is inexpensive relative to its intrinsic value, it has potential for faster price appreciation as it realigns with the firm's true worth. Here are some stocks with the lowest trailing 12-month P/E ratio.
- Jackson Financial Inc.: Provides a range of annuity products to U.S. clients. Its annuity retail operating earnings recently fell due to dropping equity prices and decreased spread income from variable-rate annuities.
- Vital Energy Inc: An energy company focused on oil and natural gas exploration in the Permian Basin, Texas. The company, previously known as Laredo Petroleum Inc., witnessed a significant drop in its shares over the past year due to declining earnings.
- Southwestern Energy Co.: An energy firm with properties in various states. It announced a $1 billion share repurchase program that will continue through 2023. The stock price has dropped significantly over the past year due to revised earnings and revenue forecasts.
- SilverBow Resources Inc.: This petroleum-producing company recently acquired two Texas-based oil exploration firms, resulting in a yearly increase in oil and gas sales for Q1 2023.
The Fastest-Growing Stocks
These stocks have been identified by a growth model that evaluates companies based on their most recent quarterly year-on-year (YOY) percentage revenue and earnings per share (EPS) growth.
- CTI BioPharma Corp.: Develops treatments for blood-related cancers. Following the acquisition news by Swedish Orphan Biovitrum AB, CTI's share price increased substantially.
- Rivian Automotive Inc.: An electric vehicle manufacturer known for its SUVs, trucks, and delivery vans.
- Mirati Therapeutics Inc.: Develops innovative cancer treatments. Its flagship medication is Krazati, used for treating metastatic non-small cell lung cancer.
- Ellington Financial Inc.: Manages mortgage-backed securities (MBS) and other financial assets. It recently announced a merger agreement with Arlington Asset Investment Corp.
Stocks Showcasing Exceptional Momentum
Momentum investing involves investing in stocks that have outperformed the market, anticipating the continuation of this trend. Here are the stocks that had the highest total return over the past year.
- Applied Digital: Provides blockchain infrastructure and cryptocurrency mining services in North America.
- Super Micro Computer Inc.: A global leader in server provision for AI platforms.
- Akero Therapeutics: A clinical-stage pharmaceutical company that develops treatments for non-alcoholic steatohepatitis (NASH).
- TG Therapeutics: A biopharmaceutical firm focusing on treatments for multiple sclerosis.
- Immunovant: A biopharmaceutical company that creates treatments for autoimmune conditions.
Conclusion
Navigating the stock market can be challenging but rewarding. Whether you are an investor interested in high-performing stocks, value investments, growth or momentum stocks, opportunities are abundant. However, it's crucial to understand the inherent risks, diversify your portfolio, and be prepared to adapt to sudden market changes. After all, success in stock investing comes to those who approach it with diligence, knowledge, and a well-devised strategy.
