The basic principles of my method are in fact quite simple:
Firstly, except in exceptional cases I only buy the stock of companies in new or developing industries, i.e., companies whose growth and earnings prospects look highly promising. I never buy stocks in established industries, in companies with huge capitalizations, or in companies which are already so big that the prospect of substantial growth is highly unlikely.
Secondly, having found such lively stocks, I certainly do not buy them straightaway. I first check the overall market trend to ascertain whether stocks in general are in an uptrend. I then check whether the stock belongs to a strong industry group, i.e., a group that is performing well in the market relative to other groups. Only when I have satisfied myself on these two points do I look in more detail at the stock that interests me.
Why all these precautions? Because I like to be sure that the odds are in my favor. If the market is in a downtrend, and the industry group is performing weakly I know that the cards are stacked against me and that my chances of making big profits are poorer than if the market and the industry are strong. You cannot be too careful in the stock market.
