Making Money in Stocks is Easy – if You Follow these Simple Rules.
You know those online stories that promise you something but then force you to wade through a bunch of ads and click to get to new pages to read it all?
This is not one of those stories! This is simply a list of the 10 most important principles when it comes to investing in stocks, followed by a couple of examples of stocks recommended earlier this year.
Making money in stocks is, in the end, pretty simple.
Making Money in Stocks: 10 Rules
- Start early, ideally on the day you’re born. (Smart parents will do this.)
- Invest long term, because the long-term trend of the market is up.
- Buy low, but not until trends turn up.
- Sell high, but not until trends turn down.
- Buy strength, particularly in stocks that are underappreciated.
- Avoid weakness, particularly in stocks that are popular.
- Listen to the market, but ignore the media.
- If you can, practice long-term market timing, so your profits are preserved when the market turns south.
- Work at it. The more time you dedicate to your investing, the better your results will be.
- Be an optimist, because otherwise you will invest too cautiously and you will miss the profits that come from the most amazing growth stocks.
As I said, the precepts of making money in stocks are simple. Where it gets tough is in translating these guidelines into action: choosing what stocks to buy, choosing when to buy; and choosing how much to buy.
But when you have expert guides, it gets easier!
Two Stocks to Buy
For example, back on January 28 of this year, when the market was rebounding very strongly from the December lows and our market timing indicators had turned bullish, Mike Cintolo recommended Shopify (SHOP) in his Cabot Top Ten Trader momentum-stock advisory.
Here’s a piece of that recommendation:
“The basic story with Shopify has always been powerful and easy to understand: The company has one of (if not the) best e-commerce platforms to help companies of all sizes (from entrepreneurs to huge brands like Nestle and Frito Lay) make the most of their online operations, develop attractive online stores, boost marketing on social media and apps and more; give them the tools to appeal to more customers (mobile sites, card readers, short-term loans); and provide a fully integrated back office suite (shipping, inventory, reporting and analytics). Prices start at just $29 per month (up to $2,000 or more for large brands), and Shopify thinks it’s playing in a $64 billion market. Some short-selling outfits have taken repeated shots at the company (low-quality merchants, etc.), but business continues to crank ahead. Shopify makes money via subscriptions (monthly recurring revenue was $37.9 million in September, up 41% from a year ago, bolstered by more higher-end subscriptions), from special services (Shopify Capital issued $76.4 million in merchant advances in Q3, up 73%) and by taking a cut of every transaction that its platform facilitates (gross merchandise volume rose 55% in Q3, while payments using its payment app accounted for 41% of all volume). The end result: Revenues continue to grow rapidly and earnings are expected to kick into gear in 2019.”
The short version is this: As brick-and-mortar stores fall victim to online shopping, Amazon (AMZN) is not the only winner; Shopify is the winner that enables many of the companies that are smaller than Amazon.
Back when that recommendation was published, the stock was trading at 159. As I write, it’s at 375; in other words, it’s up 135% in just over seven months!
Or consider Avalara, a company that has very little name recognition but is growing rapidly from another online force, the desire to collect taxes!
Mike recommended the stock in Cabot Top Ten Trader on February 25 after the stock had gapped higher on an excellent earnings report, and here’s a bit of what he wrote then.
“Avalara is a cloud-based software company that develops solutions for sales and indirect tax compliance. The stock is doing well now because sales tax compliance is becoming increasingly complex, and Avalara’s software can automate the process, making its customers far more efficient and accurate with respect to sales tax calculations, filing returns and remittance. The company is also enjoying a jump in inbound inquiries following a Supreme Court decision (South Dakota vs. Wayfair) in 2018 that allows states to require out-of-state retailers to collect sales tax from customers, even if the retailer lacks a physical presence in the state. With sales tax collections approaching $400 billion a year in the U.S., and over 30 new states having passed economic nexus laws in the wake of the Wayfair decision, Avalara appears to have a long runway for growth. Not that growth has been hard to find: The recently public company (it IPO’d in 2018) grew revenue by 27% in 2017 and 28% in 2018, and smashed expectations when it reported Q4 results on February 12. Revenue of $77 million (up 33%) beat by $5.7 million, which has helped push forward revenue growth estimates up to 21% in both 2019 and 2020. We like the story and the stock’s strength.”
Back then, the stock was trading at 51. As I write, it’s at 79, up 55%, despite being in a month-long consolidation.
So, you could just jump on SHOP and AVLR right here and take your chances, but what I really recommend is that you become a regular reader of Mike’s Cabot Top Ten Trader so that you can receive weekly guidance on buying and selling similar strong stocks.
For more info, click here.
Timothy Lutts heads one of America’s most respected independent investment advisory services. Each week, Tim personally picks the single best stock in his exclusive Cabot Stock of the Week advisory. Build your wealth and reduce your risk with the top stock each week for current market conditionsLearn More
*This post has been updated from an original version.