Following the leading Growth Stocks in every market cycle will provide an immeasurable amount of insight into the health and direction of the overall market.

A True Market Leader (TML) is a stock that dominates its industry and consistently outperforms its competitors while setting the pace for innovation and growth. In the current market cycle, we are witnessing Nvidia (NVDA) building a strong recognition and competitive advantage in Artificial Intelligence chips as it consistently demonstrates growth in revenue and earnings.

Jesse Livermore dedicated an entire chapter in his book “How To Trade In Stocks” to the importance of following the leaders. He states, “Do not have an interest in too many stocks at one time. It is easier to watch a few than many.” He then recommends, “Confine your studies of movements to the prominent stocks of the day.”

What Is A Growth Stock?

Growth Stocks, by definition, are expected to increase profitability and market share at a rate significantly higher than the overall market and competing stocks.

Often associated with their new and innovative breakthroughs, Growth Stocks are poised to thrive. Companies pioneering new methods to improve human life often emerge as top investment prospects with the potential for significant returns.

When a new product changes how we live and work, the stock price will rise when more traders begin to understand the value of their innovation.

Top-performing Growth Stocks often fall into similar sectors and industries:

Fundamentals Matter

As companies continue to develop their innovative technologies, their Earnings and Sales will proceed to increase. Heavy reliance on leading stocks tends to yield more consistent financial performance.

Leaders in the current market cycle with strong brand recognition hold a substantial portion of the market share. Their competitive advantages possess unique resources that make it difficult for competitors to replicate.

As a Growth Stock increases its earnings and sales, the stock price will rise.

When analyzing a stock’s financial performance, look for:

Follow The Leaders

Often, the first stocks making new highs in a new market uptrend are the leading Growth Stocks, and they will outperform the broader market indices and other similar stocks. Conversely, leading stocks will be among the first group to begin breaking down near the top of the market cycle.

The leading stocks will be one of the best ways to gauge the overall market health.

Leaders Outperform

During a standard 10% market rally, leading Growth Stocks often generate returns exceeding 100%. Top-tier stocks have the potential to multiply investors’ returns well beyond the market averages.

Leaders Give Warnings

Near the end of an uptrend, the market-leading Growth Stocks are often among the first to break down. Following these leading stocks helps identify areas of weakness in an extended market.

Screening For Leadership

To help investors find the leading stocks, Deepvue provides Screener Presets. The Deepvue Leaders screen includes basic fundamental and technical criteria, plus relative strength and industry rankings.

Use this screen to cycle through stocks that have enough liquidity for institutional interest, increasing earnings and sales, and are among the highest ranking for relative strength.

Routinely utilize other Screener Presets to cycle through stocks that display leadership characteristics.

Target Lists

Your daily and weekend routines should include a series of watchlists you actively monitor and rearrange. Utilize Deepvue’s Target Lists to easily manage your focus watchlists.

1. Limit your Universe with basic liquidity criteria – Filter out cheap stocks while putting more emphasis on stocks that trade with a higher dollar volume.
   
2. Go through your Universe list every month and refine stocks down to a Seasonal watchlist that you look at every week. Look for common themes and stocks near highs to uncover potential leadership.
   
3. Every week, go through your Seasonal list and develop a focus list of Leadership stocks – Dive into the fundamentals of every stock and look for growing earnings and sales.
   
4. Routinely go through the Leaders list to refine your focus to a Weekly list you will watch every day – Look for stocks consolidating near highs or with accumulation near higher time-frame support areas.
   
5. Use the Favorites tab to create a Daily focus list you will monitor at the market open and throughout the day – Keep this list tight with only the top 10 best leadership stocks in tradable ranges.

Key Takeaways

Leading Growth Stocks serve as an indicator of overall market health, helping to signal a new emerging uptrend or the nearing end of the uptrend.

Growth Stocks are best recognized as stocks that outperform the market during uptrends. If an index advances 15% the leading stocks may increase over 150% or more.

Look for stocks with robust quarterly and yearly earnings and sales growth. Identify market themes to find companies dominating their respective industries with strong brand recognition and competitive advantages.

Routinely screen for potential leadership stocks by looking for stocks making new all-time highs with strong relative strength.

Regularly Maintain a series of watchlists to funnel your focus from a wide Universe of liquid stocks down to the top 10 strongest stocks of the current market cycle.

Frequently Asked Questions