Lesson 27 of 43: The Magic of Combining Investment Strategies

  • In our last six lessons, we covered how to find the best small cap, large cap, dividend, growth, value, and blue chip stocks on the market.
  • Based on our extensive research, these are all incredibly powerful criteria that can help you find the best stocks in any area of the market.
  • These criteria aren’t relevant to just a single type of stock, sector, size, or strategy. They’re universal metrics that can help you find the best stocks wherever you may look.
  • We explain how to combine several strategies to find the best stocks. 

In our last six lessons, we covered how to find the best small cap, large cap, dividend, growth, value, and blue chip stocks on the market.

As we wrap up this batch of lessons and move into when to buy and sell your stocks, there are two VERY important lessons we want to emphasize:

First, for each investment strategy we used slightly different criteria and settings to screen for the ideal candidates.

However, you probably noticed that the same criteria came up again and again. We screened for companies that were:

  • Profitable and growing
  • No burdened by excessive debt
  • Relatively stable
  • Modestly undervalued
  • Paying a healthy, growing, and sustainable dividend (only for dividend-paying stocks)

Based on our extensive research, these are all incredibly powerful criteria that can help you find the best stocks in any area of the market.

These criteria aren’t relevant to just a single type of stock, sector, size, or strategy. They’re universal metrics that can help you find the best stocks wherever you may look. 

This leads to our second very important point:

Our research suggests the best approach is to look for stocks that COMBINE these winning criteria together into one company.

For example, rather than buy a few undervalued companies, plus a few high dividend stocks, plus a few steady growth companies, our research suggests you’ll make more money over time by looking for high dividend stocks that are growing and currently undervalued.

In other words, don’t look for the best value stocks and then separately look for the best growth stocks. Instead, look for the most undervalued stocks that are growing steadily, or the best growth stocks that are currently undervalued. 

By combining these winning criteria all into one single stock, you get two big advantages:

  1. You’ve now placed a “bet” on multiple winning strategies (value, growth, dividends, etc.) with just a single stock. So that stock has a chance to earn you money because it’s undervalued OR growing OR paying a healthy dividend OR all of the above!
  2. A single stock that meets all the characteristics we reviewed above is likely to be a high-performing company with a strong management team and a compelling set of products. Any company that’s profitable, growing, paying a healthy dividend, and carrying modest amounts of debt is likely a special stock.

Now, imagine if you buy 10-30 of such companies, filling your portfolio with the shares of profitable, growing, low volatility, undervalued companies.

Such a portfolio has a very strong chance of beating the market over time and earning you handsome profits along the way.

So this is our bottom line and one of the most important messages of this entire course:

Regardless of what type of stocks you want to buy (value, growth, dividend, blue chip, etc.) make sure to include at least a dash of other strategies as well.

  • Value stocks are likely to perform better if you screen out companies with declining growth.
  • Dividend stocks are likely to provide you with better long-term income if they’re profitable.
  • Blue chip stocks are much more likely to increase in price if they’re currently undervalued.
  • High momentum stocks are less likely to crash if they’re not grossly overvalued. 

The best stocks for your portfolio should focus on your core investment strategy while also scoring decently well on other proven investment strategies.

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Author

Todd Lincoln

Author

Passionate stock market investor with deep experience trading small cap, dividend, and growth stocks.

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