CHICAGO, March 4, 2011 /PRNewswire/ -- Stocks in this week's article include: Hercules Offshore, Inc. (NASDAQ: HERO), Cal Dive International, Inc. (NYSE: DVR), ION Geophysical Corp. (NYSE: IO), Key Energy Services, Inc. (NYSE: KEG) and Matrix Service Co. (NASDAQ: MTRX). Kevin Matras looks at how to find winning stocks in the winningest sectors.
Screen of the Week written by Kevin Matras of Zacks Investment Research:
Nearly half of a stock's price movement is tied to the performance of its respective group (Sector and Industry). That being said, most great stocks from great groups often have some great peers as well.
If you find yourself in a killer trade (or wished you were in one), take a look at the characteristics of THAT STOCK and then hunt within its group to find OTHER STOCKS that share the same characteristics.
Does a certain outstanding stock exhibit great sales growth? I'm sure there are at least a few within its group that are showing similar numbers. What about increasing margins? If the stock is doing well, it's likely that the industry itself is experiencing meaningful increases in margins too.
This type of screening is often called 'modeling'. Figure out the components of what makes something successful and concentrate on that.
If you're in love with a certain stock or sector, but it's doing nothing...or worse, moving against you...then move on. If you see great stocks in great groups while you're stuck in laggards or non-movers, find what stocks are successful and model them.
If the winningest stocks in a particular sector or industry are trading at PE ratios that you generally wouldn't consider...instead consider this: if you had considered them, they would be winning for you.
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