The 3 simple things I look for to find great stocks

Can investing be stress free? NO!

But, that should be the goal, right?! 

Too often, new investors make things complicated. Learning to simplify your decision-making will reduce stress and make you a better investor.

The most important step is creating a system that works for you. Not only will it save you time, but after you’ve narrowed down a repeatable stock “playbook” approach… you can hone your skills. 

In my many years of experience, I’ve isolated 3 characteristics to find stocks that are good targets:

1. Great fundamentals
2. Great technicals
3. Consistent Big Money activity

Again, this is what works for me. It’s my playbook. 

I call it my “holy trinity.”

This approach allows me to separate investment candidates more easily. And finding a repeatable process should be the goal of all investors.

Last week, I mentioned I’m expecting a pullback in the coming weeks. With this game plan, I’m prepared for anything. When stocks eventually pull back, I’ll be keeping an eye out for those with the following characteristics.

Great companies have great fundamentals

So, what are great fundamentals? Fundamentals relate to a company’s financial results. 

Let’s use an analogy that most of us can relate to: professional football. 

On paper—or in your fantasy league—you can see the best-performing players. Their success is measurable. Take Tom Brady and Drew Brees as examples. These elite quarterbacks are some of the best in the business. They consistently play at a high level. They put up a lot of touchdowns, passing yards, and points. The key takeaway is that they repeatedly do well. And it shows up in the statistics.

Companies with great fundamentals operate the same way. They don’t have one great earnings report and then fade away. The best stocks have amazing businesses that generate sales and earnings growth. You’ll be able to see their success on paper when the company reports its financial results. 

It’s like putting points on the scoreboard. 

Great stocks have great technicals

Technicals relate to how a stock trades over time. The easiest way to do this is to check out its chart. 

Is the stock in an uptrend or downtrend?

Long-term investors want stocks that go up. The biggest winners will continuously make new highs. 

Let’s circle back to our football example. Great players don’t just put up stats; they also win games. And that’s the technical factor. 

Stocks with great technical attributes will have a chart that goes up and to the right. Their prices will keep climbing as Wall Street rewards their fundamental performance. 

Will they have setbacks along the way? Of course! The key question is, “Does the stock head higher over the long-term?” That’s really all that matters.

Now, let’s go over the final piece of my holy trinity of investing.

High-quality stocks see constant Big Money activity

The third characteristic I look for in a potential investment is Big Money buying. Years of experience on Wall Street taught me that the brightest institutional investors buy stocks with great fundamentals and technicals.

And that makes sense. The winning stocks of tomorrow will have hundreds of smart asset managers along for the ride!

Here’s an example of a stock that encompasses the holy trinity: Amazon (AMZN).

Below, I’ve included my Big Money signal overlaid on Amazon’s chart. Each green bar indicates a date when Amazon ranked as a top buy signal.

To make a green bar, a stock must rank high with a fundamental score, technical score, and see Big Money activity. 

Everyone should agree that Amazon has a great business and also a fabulous chart. 

There have been 32 green Big Money signals since 2015. The more Big Money signals, the better the odds of success.

The bottom line is this: As you continue your investing journey, you should keep things as simple as possible. 

Find a repeatable system that works for you and stick with it. Mine is the holy trinity of investing.

Can I get an amen?!

Luke Downey is editor of Curzio's The Big Money Report, which recommends the best long-term growth stocks. Luke honed his strategy over many years at Wall Street institutional derivatives desks, and as co-founder of investment research firm Mapsignals. Luke is also an options instructor with Investopedia Academy.