Tuesday, July 23, 2013

This Indicator Combo Points to the Biggest Winners

There are many ways to find winning trades. Investors have long looked at value and growth methodologies as two distinct investment approaches.

Other investors have combined those two schools of thought into a single approach by using the PEG ratio to compare the price-to-earnings (P/E) ratio to the earnings growth rate. An additional refinement to this approach is to add relative strength (RS) in an effort to find undervalued stocks that are ready to move higher in the short term.

A less widely followed approach to investing is to focus on volatility. A stock's volatility is now being recognized as an attribute that can be used just like the P/E ratio to find potential winners.

Research has shown that low-volatility stocks tend to outperform high-volatility stocks when returns are adjusted for risk.  (more)

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