How to Select a Winning Stock from a 52-Week List

Many investors when deciding on the purchase of a stock face the dilemma of whether to buy a stock that is part of the top 52-week high list or a stock that is part of the 52-week low list.

Many online resources provide information on such charts, giving the name of the stock and its price movement.

New Highs vs. New Lows

Many investors will prefer stocks from the list presenting 52-week lows. Their argument will be that in order to be successful you should buy low and sell high.

The stock you select from this list may be overlooked by the market in its chase after other "hot" deals. Or its low price may be due to some regulatory squeeze that is predicted to end in the near future.

You may justify your choice by the argument that a company that is at the bottom is more likely to lift up than a company that is already at the top. The latter's potential for growth is less likely.

On the other hand, you may select a stock that is part of the 52-week highs. You may justify your reasoning by stating that the company has reached these highs thanks to its right execution of its activities and way of doing business.

Since the market has moved the stock so up, it is fond of its way of doing things. Therefore, the stock is likely to continue to move up.

This choice justification holds more reliability since a stock in its highs has proven its capabilities, whereas a stock in its lows has not proved anything whatsoever.

Other Factors

When you decide on the investment in a stock, you should not concentrate only on the position of the stock in these lists. There are other factors that should be included in the selection process.

However, the direction of the price of the stock is an important factor that should be considered.

Price should be part of your strategy since it provides you with a hint on the potential performance of the stock.

If you select a strategy that includes the stock selection from the 52-week lows, then you are taking the risk of selecting a company that will not come out of the dirt. However, it has been proven that a big percentage of the companies in this list manage to recover.

You should consider whether it is worth the time to examine all the companies to find the ones that will really manage to come out for gains, and that you will not bet on a company that will not manage to survive.

The second strategy we have offered to you is to select a stock from the list showing the 52-week highs.

You should not be concerned with the rule of buying low and selling high at this moment, because it only applies for stocks, whose prices have been artificially inflated.

There are some companies with artificially inflated prices, but it is easy to recognize them among the rest. Such companies have experienced an increase in their stock price of 30% in just one day.

The stocks you should purchase from this list are the ones that have experienced a stable growth over a longer period of time. Once you have selected several such stocks, it is time to do your homework and make some additional research.

Finally, finding a stock that represents a good deal may be good investment strategy. So, if you decide to apply such a strategy the 52-week lows list should be your stopping place.

However, if you are looking for a winner that has the potential to keep rising look at the 52-week high list and sift the stocks that are artificially inflated and don't deserve your attention.

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For knowledge we can highly recommend you subscribe to the The Wall Street Journal.

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