Buy Stocks With A Composite Rating Of 90 Or More

Investor's Business Daily
Investor's Business Daily

Jul 09, 2008 11:09 EDT

IBD's stock ratings save you a ton of research time by crunching vast amounts of statistics.

At a glance, investors can find out how well a company has performed in terms of earnings growth, sales growth, stock price, institutional buying and other critical factors that help determine if a stock is a leader.

Focus on stocks with Composite Ratings of 90 or higher and Relative Price Strength Ratings of at least 85.

The Composite Rating consolidates five major IBD stock ratings: the Earnings Per Share and RS Ratings, the SMR Rating (sales + profit margin + return on equity), the Accumulation/Distribution Rating and the Industry Group RS Rating. The stock's relationship to its 52-week high is also factored in.

Harnessing all that data, the Composite Rating works well as a comprehensive tool.

Ratings of 90 or higher mean a stock ranks within the top 10% of the market in terms of these multiple parameters.

The Relative Price Strength Rating tells you how well a stock has performed vs. all other stocks in the past 12 months, with a heavier emphasis on the three most recent months.

You may think high RS Ratings mean the stock is peaking. But keep in mind that leaders often form price consolidations after a prior advance in which they have demonstrated their strength. Thus, they often will show a strong RS Rating before a big run-up.

The list above shows stocks above $15 a share with top Composite Ratings and high RS Ratings too.

The market is in a correction now, so your chances of finding stocks that rise are reduced. But it's an ideal time to build a fresh watch list of highly rated stocks. Be ready to buy those that break out of bases when the market resumes its uptrend.

Source: Investor's Business Daily