Lessons On Buying Stocks

How To Select The Right Stocks At The Right Time


The seven lessons in this course explain the characteristics of successful stocks and the forces that push them up. The first seven lessons explain specific traits to look for when buying stocks.

4) Check the Industry Group

Research shows that one of the key reasons for a stock to move up is due to the strength of the industry it belongs to. This means tracking the performance of industry groups is important. In this lesson, you'll learn how to do this plus identify stocks in the most attractive industry groups.

Most rising stocks belong to leading industries. Investing in the right industry group is almost as important as investing in the right company. View the top 10 industry groups on www.stockaxis.com.

Economic conditions and trends, in large part, determine which industries and sectors rise to lead the market. Each new market cycle is led by certain industries. In the late 1990s, for example, telecommunications and Internet-related industries were the leaders. Through much of 1993, generic-drug makers led the market by offering less expensive medications to a cost-weary pharmaceutical market. In the market cycle of 2004, construction and realty related industries led the market. The later part of the 2003 – 2007 boom saw infrastructure companies do extremely well. The period 2009 to 2015 saw the revival of IT and pharma industries, both of which are export oriented. The last couple of years have seen consumer and NBFC sectors out-performing the markets. Companies in the top-performing industries usually enjoy strong demand for their products and services that can drive up their stock's price.

Here are a few examples of historically successful industries and the factors that propelled them to the top. As you can see, economic conditions and trends can play a huge role in determining which industries lead the market.

Industry : Fundamental Factors
Biotechnology : Breakthroughs in gene research
Wireless : Growth of "anytime, anywhere" communication technology, such as
Internet Infrastructure : Demand for high-speed connections.
Renewable Energy : Rise in crude oil and technology breakthroughs in renewable energy

Sometimes, a major development happens in one industry and related industries later reap follow-on benefits. For example, in the late 1960s in America the airline industry underwent a renaissance with the introduction of jet airplanes. The increase in air travel a few years later spilled over to the hotel industry, which was more than happy to expand to meet the rising number of travelers.

But some industries and individual stocks don't ride the leaders' coattails. Don't assume that just because it's the rainy season umbrella manufacturers will suddenly surge. You must still look for quality companies capable of producing healthy earnings, sales, resulting from exceptional products and services.

You don't have to scan every single stock to find out which industries are leading the market. Each day, StockAxis.com's top industry groups, found in the Market Analysis section, lists the top 5 industry group out of over 250 different industry groups by analyzing the price performance of all stocks in each group over the latest six months. This is a realistic period in which to observe market trends.

Why over 250 industry groups? Because the Indian economy is fragmented, and industries tend to spawn related businesses that become industries in their own right. Take the computer sector, for instance. It's not just PC makers. There's also Computer-Graphics, Computer-Education, Computer-Hardware, Computer-Peripheral Equipment, Computer-Services, and Computer-Software, which itself is divided into large, medium and small enterprises. More specific industry classifications make it easier to pinpoint specific areas leading or falling behind.

Reading sector movements helps judge the overall market because different sectors perk up at different stages of the business cycle. For example, the defensive sector (This sector includes supermarket chains, utilities, etc., which are sometimes viewed as havens during market slumps. People don't change their spending much in such industries even when times are tough.) rises during times of economic weakness or when investors think the economy is headed down. The high-technology sector has been strong during expansion phases.

Look for sectors showing the most stocks making new price highs.

Another excellent way to spot market leadership is to look at stocks making new 52-week price highs. Look for sectors showing the most stocks making new price highs. These are usually the leading market sectors.

  • Much of a stock's move is due to the strength of its industry. You want to own stocks in industries that are displaying strength and market leadership.
  • Different industries move to market leadership as economic conditions and consumer trends change. You can identify the new leaders by watching the top five industry sectors with stocks making the most new price highs.

Leave a comment

6 Comments


malondkar
Aug 11, 2018 at 02:47 Reply

educative lessons for beginners. investors would like to know about the roles the swing operators, hni, short traders and media operators. these are the people who play most important roles in deciding trends.


Team StockAxis
Aug 13, 2018 at 04:05

Dear malondkar,

Thak you for your appreciation Sir.

We have noted your feedback and will try to come up with these lessons as soon as possible.

We recommend you to also read the following blogs.

Use The P/E Ratio Smartly!



Regards,
Team Stockaxis


Damodaran Thakku
Aug 05, 2018 at 07:54 Reply

This is a very good lesson for the beginners to know more about the stcokes investment and the consequences before investing in Hugh amount or their saving to get good return subject to other factors of like putting money in the bank for fixed deposit that will earn only Limited returns. Where as investment in the stock market with knowledge gives/ gets good return over a period.


Team StockAxis
Aug 06, 2018 at 09:46

Dear Damodaran Thakku,

Thank you for visiting us and believing in us!

We recommend you to also read the following blogs.

StockAxis Market Intelligence

Regards,
Team Stockaxis


Buddhadeb Pal
Jul 22, 2018 at 12:01 Reply

I think Meghmani Organic and Future Consumer will be thousand bagger stocks in future. Though, I don't know how much time it will take.


Famnath
Jul 21, 2018 at 02:52 Reply

Excillent for the bigner but make lt bit more simple for sr citizen, thanks


Team StockAxis
Jul 21, 2018 at 03:19

Dear Famnath,

Thank you for your appreciation, Sir. We will surely try to implement your feedback from our next study articles and lessons.

We recommend you to also read the following blogs.

StockAxis Market Intelligence

Has the Recent Correction Made Valuations Attractive?



Regards,
Team Stockaxis


Kamal Gupta
Jul 21, 2018 at 02:22 Reply

Good course to know about shares and in relating to investment in share market.


Team StockAxis
Jul 21, 2018 at 03:17

Dear Kamal Gupta,

Thank you for visiting us and believing in us!

We recommend you to also read the following blogs.

5 Rules to Deal With a Volatile Market

Using the EV/EBITDA multiple smartly!


Regards,
Team Stockaxis


kalpataru das
Jul 08, 2018 at 08:30 Reply

excellent report about stock


Team StockAxis
Jul 11, 2018 at 10:01

Dear kalpataru das,

Thank you for visiting us and believing in us!

We recommend you to also read the following blogs.

StockAxis Market Intelligence

Has the Recent Correction Made Valuations Attractive?

Regards,
Team Stockaxis