Everybody in the world has heard the classic adage “Buy Low, Sell High.” It makes perfect sense, right? Who wouldn’t want to buy a stock at $5 and watch it go to $100? In practice it’s not so easy as anybody who has invested can tell you. Here is another strategy that you may have not considered: “Buy High, Sell Higher.”
Humans have a built-in aversion to buying things that are “expensive” or that cost more than they remember something costing before. This is understandable in other areas such as shopping, but it may actually hurt you in the stock market. Basically good stocks go up and bad stocks go down. It sounds simple, but it can be hard to fully register. People always want a bargain but that is a double-edged sword in the stock market.
Looking in the Wrong Place
Some people browse the 52-week lows list to find potential candidates that are beaten down and represent good value. I believe this is a mistake and it is the exact wrong place to look. Those companies are usually there for a good reason. Barring a complete market meltdown (which did recently happen) poor companies will litter this list. Stocks that have poor earnings, and declining growth prospects are the usual suspects on that list. Once in a while you will find some great values, but most of the stocks will have much more downside.
The 52-week high list is a much better place to look for buy candidates. Look at Dell and Microsoft in the 1990’s. These two stocks were on the list almost every week, yet each week, especially earlier in the decade was a terrific time to buy either stock. Earnings kept growing and beating analyst estimates which caused investors to keep bidding up the stocks.
Of course you must do your own due diligence with any stock you buy. Each stock should stand alone on its own merits. However, the 52-week high list is a place that is full of proven winners that could move even higher. You might just gain an edge by looking in a place that many others overlook. The new motto should be “Buy High, Sell Higher.”
Buy Low or Buy High? is an article from: 
