The stock market’s biggest winners have historically had the following characteristics;
- They offer a new service or product and are either the dominant player in a new industry or the only significant participant.
- They are a recent I.P.O.
Apple (AAPL) is an example that is clearly one of the market’s hottest stocks since they launched the iPod in 2004. But now we may have another choice, a new one, with professional social networking site Linkedin (LNKD).
The Next Big Winner?
Linkedin (LNKD) has most of the characteristics of a stock with significant potential. They have tremendous fundamentals, are one of the most significant social networking sites and they were a new entrant to the stock market May 19th, 2011. Investors who bought the stock following the I.P.O. might wonder how this stock qualifies as a winner when the first day of trading hit $122.70/share and it has been lower by as much as 50% since then. But the I.P.O. was ill timed as a market correction was becoming increasingly evident. I.P.O.s, as a group, is one of the best indicators of general conditions as they magnify investor sentiment. Accordingly, in periods of stock market corrections, they trade terribly. Pandora (P) and Zillow (Z) are two other examples that have traded in deep ranges, or bases, since the first day of trading following their I.P.O.
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Quarter ended
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Earnings Growth
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Revenue Growth
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Dec. 31, 2011
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+140%
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+105%
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Sept. 30, 2011
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.06 vs. .06
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+126%
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Individual investors have a big advantage over mutual funds. They don't have to own 100 or more stocks and they certainly don't have to hold any stocks when the market trend is a correction or bear market. But their relative advantage implies they should be focused on holding only the absolute best choices during up trends. After all, why own an inferior choice when it is just as easy to choose a proven performer?
What Linkedin (LNKD) doesn't have yet is the proof the stock is a winner and out performer. But the stock has indicated a distinct change in the way it is trading shifting to bullish mode in very heavy buying at just over $82.50/share. Accordingly, investors may manage the stock the same as any other stock in this condition by taking a normal, or smaller, position now and adding to it later as it proves its merit.
