Best Stock, Top Stock, Best Stocks, Hot Stocks

Stocks that are in high demand are called hot stocks or top stocks. However, the best stocks are those that represent companies with great potential, but are currently undervalued. In the bullish market of the late 1990s, stocks from industriessuch as information technology and telecommunications were considered the best stocks. During the financial crisis of 2008, defensive stocks, such as those of pharmaceutical companies, were considered the best stocks. The term ‘hot stock’ is alsoused for shares of an initial public offering (IPO). These shares may witness very high demand and their price can surge inthe matter of a few days. One of the most historic IPOs was that of Google in August 2004. Google shares surged 18% in theirmarket debut.

How to Spot Best Stocks

Identifying top stocks at the right time is key to ensuring the success of your investment. Here are some considerations forspotting the best stocks:

High performing sectors: Companies that belong to high growth and flourishing industries are likely to perform well. Thus, as an investor looking for top stocks, one should begin by identifying hot industries. For instance, from the 1970s to the 21st century, industries such as consumer electronics, information technology, airlines, automobiles and telecommunications have risenand declined.

General research: Read research reports, investment magazines and investment blogs. Business news channels on television (such as CNN and BBC) are also a good source of investing information. When reading or watching television, one can focus on the opinions of industry and market experts as well as interviews of the top management of various companies. Various market forums on the Internet offer hot stock investing tips. However, one has to be careful while following them to make the correct investingdecision.

Company specific analysis: By analyzing company specific parameters, one can identify stocks that have the potential toappreciate. This analysis includes:

• A thorough understanding of the company: Before investors decide to buy a company’s stock, it is important that they educatethemselves about the firm’s business model and the health of the balance sheet.
• Assessing the strength of the management: The prospects of a company are greatly influenced by the experience and efficiencylevels of its top management team.
• Specific events: Events such as the ousting of a CEO, a buyback announcement or a merger can influence the future of acompany’s shares.

Investor sentiment forms the fulcrum of the stock market. Investor sentiments can shift with time and can favor certain industries and companies.