Understanding the Top 5% of All Stocks
Stock market history has consistently shown that the best stocks to watch often have a 95 or higher Composite Rating in the early stages of a significant price move. This Composite Rating, which ranges from 1 (worst) to 99 (best), provides an overall score based on the stock’s grade for each of the other IBD SmartSelect Ratings. These ratings can be instantly accessed through Stock Checkup for pass or fail ratings for these stock ratings and other metrics.
- EPS Rating: This tracks annual and recent quarterly earnings, with a range from 1 (worst) to 99 (best).
- SMR Rating: This measures sales growth, profit margins, and return on equity. The range is from E (worst) to A (best).
- RS Rating: This gauges a stock’s strength compared to the entire S&P 500 universe of stocks. The range is from 1 (worst) to 99 (best).
- Accumulation/Distribution Rating: This tracks institutional buying and selling in the stock over the last 13 weeks. The range is from E (worst) to A+ (best).
Relative Stock Ratings: The Key to Identifying Best Stocks
The Composite Rating, EPS Rating, and SMR Rating are relative stock ratings, meaning they compare the performance of the stock to that of all other stocks on the market. For instance, a Composite Rating score of 95 implies that the stock is outperforming 95% of all stocks in terms of the most important fundamental and technical stock-picking criteria. However, it’s crucial to remember that investment decisions should not be based solely on these ratings. Always check the stock chart and current market trend before investing.
Stocks Hitting 95+ Composite Rating
Several stocks have recently hit the 95+ Composite Rating mark, indicating strong performance. These include BW LPG, whose Composite Rating rose from 82 to 96, and Confluent, which saw its Composite Rating climb from 94 to 99. Other stocks that have joined the 95+ Composite Rating club include Hyster-Yale Materials, Arista Networks, Afya, Dutch Bros, and Hess Midstream.
Conclusion
Monitoring stocks with a high Composite Rating can provide valuable insights for investors. These stocks are outperforming a significant percentage of the market, making them potential candidates for further investigation. However, investors should always consider other factors and market trends before making investment decisions.
