How to Spot Hot Stocks?

Knowing how to spot hot stocks can be an important part of an investment plan. Identifying trends can be critical to finding the hottest stocks available and can greatly increase your odds of a good return on your investment. There are several different ways that investors can find the hottest stocks, and each investor will have their favorite methods and processes to choose these stocks. One way to look for hot stocks is to watch market trends. Determine what industries are hot right now and then look at the stocks within these industries.

Industries contain companies that are in businesses that are similar or closely related. During market trends, usually almost all of the companies and stocks within the same industry will follow the market trend. If renewable energy, for example, is hot right now, then stocks in renewable energy will also be hot. These trends can help experienced investors locate hot stocks that may go up. The trick to following market trends to find current hot stocks is to locate these trends before they take off. This can be difficult, and if the stocks are bought after the trend has been established, there is missed potential because the price of the stock has already gone up significantly. Market conditions affect industries, and this can have an effect on all the stocks within an industry. If the industry is hot and the trend is rising, then the stocks in the industry will usually also rise. The same is true if the trend is falling. In this case, the industry stocks will also fall.

Industry trends are identified by watching the performance of stocks in the industry carefully. Identifying a trend at the very start means you're maximizing the investment return potential. Investors can also use other factors to help determine hot stocks. One way to identify these stocks is to closely watch the earnings forecasts from the Wall Street analysts. When these forecasts show significant changes, or when there are surprises concerning recent earnings, this can signify what stocks will probably rise and what stocks will probably fall. If a company has a much better earnings report than the analysts predicted, the stock price will increase. If the earnings are below the prediction, the price of the stocks will usually fall.

New information becoming available can be used to help predict hot stocks. When Ford announced massive layoffs, the stock in Ford fell significantly, and other stocks in the auto industry also went down some. If there is current news showing a merger or takeover, the stock for the companies involved, and the other stocks in the same industry, will generally go up. Having all of the current public information available can help decide what stocks are hot picks and what stocks are cold fish.

Knowing how to spot hot stocks can mean getting in at the bottom, before the stocks start rising. This will allow you to increase your investment returns significantly. Research the different methods available to spot hot stocks before they begin to rise and you will be a more profitable investor. Initial Public Offerings, or IPOs, also include some hot stocks, but there are many cold ones as well. An IPO is the initial stock offering available to the public, when the company first offers stock for sale. If the company is a quality company, you can purchase stock that may rise considerably. This does involve risks though, because many IPOs fizzle out and never go up.

The information supplied in this article is not to be considered as medical advice and is for educational purposes only.