What it Takes to Find the Best Trades

“Ahead of the Street” Column, by Mitchell Clark, B. Comm.

One of the best ways to find the hottest stocks in the market is to check the top gainers, biggest percentage movers and those stocks with the biggest change in trading volume. You have to do this regularly, but the results can be very worthwhile.

Doing this on a daily basis, I recently came across two very interesting companies that are currently experiencing a lot of upward price momentum. I tend to favor a buy-low/sell-high type of investment strategy, but I recognize that you can make money buying high and selling higher if the sentiment is right in the broader market.

One of these companies makes plate heat exchangers and temperature gauges for industrial customers in China. This isn’t the kind of business that you get really excited about, but it doesn’t matter. The stock is on fire right now, because the business is growing so fast.

The other interesting company manufactures blood plasma for use in medical emergencies and the treatment of various diseases. Again, this business operates in China and it isn’t the kind of story you think about when you’re looking for a high-growth company. This stock has more than doubled just in the last three months and the company’s 2009 revenues are about to cross the 100-million-dollar mark, almost triple the level of sales from last year.

I’m not really enthusiastic about investors taking on new positions at this particular time, but I have to admit, there are some risk-capital trading opportunities in the market right now that are very attractive.

The key to finding the market’s hottest stocks is to always be looking. Even if trading action is poor, you have to keep looking on a daily basis if you want to catch the best opportunities. You might be the best possible customer a brokerage firm could have, but no broker has the time (or usually the skill) to consistently find the best trades the market has to offer. As is always the case, if you want something done right, you have to go do it yourself.