How can you tell which stocks will fly and which will flop?
This question plagues many investors.
As a quantitative strategist, I focus on data.
So I was curious… What could the data tell me about the biggest market movers?
A Deep Review of the Biggest Winners
Looking back at the last 22 years, I found that our Oxford Club strategists have made about 5,500 trade recommendations.
That gave me a sizable data pool to analyze.
My first step was to work with our research team to determine which of those stocks had the biggest gains.
Once we identified the winners, we dug a bit deeper…
What, if anything, did these outperforming stocks have in common?
It took months of in-depth analysis, but what we found was remarkable.
We identified five key attributes that every one of The Oxford Club’s all-time top-performing trades shared.
We call them “super-metrics.”
Here’s what they are…
Super-Metric No. 1: A low market cap.
Smaller companies have greater potential for rapid growth than well-established giants with trillion-dollar market caps.
With its $2.4 trillion value, Apple (Nasdaq: AAPL) is unlikely to rise another 1,000%. (If it did, its market value would exceed the United States’ GDP.)
The average market cap of our biggest winners was just $3.2 billion. This metric helps us target small companies with a lot of room to grow and a far better chance of becoming 10X or even 100X winners.
Tomorrow’s Apple is today’s small cap stock.
Super-Metric No. 2: A low debt-to-equity ratio.
Debt-to-equity (D/E) ratio is used to evaluate a company’s financial health by measuring its debt relative to its net assets.
By identifying companies with a low D/E ratio, investors can weed out companies in even minimal danger of financial distress.
Small companies are often unprofitable for years as they accelerate their growth. That’s okay, as long as they have enough cash on hand to keep the business running.
For small companies, cash is king.
Amazon (Nasdaq: AMZN) was unprofitable for more than a decade. Today, it’s a moneymaking machine.
Super-Metric No. 3: A “Goldilocks” relative strength index.
Relative strength index (RSI) is a technical indicator that measures price momentum. It ranges from zero (oversold) to 100 (overbought).
Technical indicators allow us to take the temperature of a stock. That ideal temperature is not too hot and not too cold.
Red-hot story stocks tend to flare out after epic short-term runs. Other stocks can be value traps, trading sideways for decades.
A “Goldilocks” RSI falls between 30 and 70, neither overbought nor oversold… just right. The average RSI of our biggest winners was 54.
Super-Metric No. 4: A beta greater than 1.4.
Beta is a measurement of a stock’s volatility compared with the broader market’s.
A stock that moves less than the overall market has a beta lower than 1.0. A stock that moves more has a beta higher than 1.0.
High-beta stocks are often riskier but have the potential for higher returns. Small cap stocks with terrific long-term upside potential often come at the price of higher volatility.
Our biggest winners had an average beta of 1.42, indicating that they tend to move more than – and beat – the market.
Super-Metric No. 5: A low share price.
A low share price gives a stock a lot of room to grow. Our biggest all-time winners had an average share price of around $20.
Today’s biggest winners all started out as low-priced stocks.
Take Tesla (Nasdaq: TSLA), for example. Today it’s trading above $760 – after stock splits. But it went public at just $17 a share.
The winning stocks we analyzed – which all shared these five super-metrics – absolutely trounced the market. They outperformed by 1,690% over an average holding period of just 8 1/2 months.
But how can average investors benefit from this highly technical analysis?
Let me explain…
Membership Has Its Privileges
Back in the 1990s, American Express used the slogan “Membership has its privileges.”
You could say the same about The Oxford Club.
Our goal is – and always has been – to provide the best investment research in the world.
To that end, our strategists produce hundreds of well-researched recommendations each year.
But the sheer number of recommendations can feel overwhelming – especially for new investors, though we’ve even heard this feedback from longtime Members.
We take Member feedback very seriously, so we set out on a mission. How could we simplify things?
That’s where these super-metrics come in.
Using our findings, I worked with our research team to create a sophisticated ranking system for our Oxford Club recommendations.
Our system analyzes all the open recommendations from The Oxford Club’s VIP Trading Research Services.
The system generates a score for each recommendation based on the five super-metrics. We use those scores to determine the top 10 recommendations with the most profit potential.
And now we’ve added those top 10 to an elite portfolio – our brand-new Oxford X portfolio.
By pinpointing the 10 very best trades ahead of time, we can help our Members focus their time, energy and investments on those recommendations.
In fact, CEO and Executive Publisher Julia Guth said, “It’s one of our most important developments in my 30 years at the Club.”
I’m extremely proud of the work we’ve done to create this new Member benefit. It’s perfect for the busy investor and will make huge strides in simplifying your financial world.
And remember, membership has its privileges…