How to Find Trending Stocks to Buy
Before learning how to find trending stocks to buy, let’s take a look at two different investing scenarios. They use the exact same strategy…
Scenario One: You buy stock in Tesla at the beginning of 2020 and sell it one year later at the start of 2021. You earn a wildly impressive return of 820% in just one year.
However, what if we shifted these dates just a little?
Scenario Two: Instead of buying Tesla at the beginning of 2020, you decided to wait and buy at the start of 2021. Now, instead of earning 820%, you lose 30% over the first six months of 2021.
If you were investing $10,000 in Tesla then this mistiming would’ve cost you tens of thousands of dollars. If you nailed the timing then you could’ve made $72,000. If you botched the timing then you would’ve lost $3,000. By waiting another year to invest you lost $3,000 AND missed out on earning $72,000.
This is the power of identifying trending stocks and capitalizing on them.
Now, when it comes to investing, hindsight is always 20/20. By this, I mean that the right decision is always obvious once the event has passed. However, being able to accurately time your investments can have a gigantic impact on your portfolio’s return. A huge part of this is identifying and investing in trending stocks.
This article will take a look at a few strategies to help you identify trending stocks to buy…
What Are Good Trending Stocks to Buy?
Before I get started, I want to mention that trying to time stock investments can be risky. A much safer approach is to slowly invest small sums of money over time. This strategy is called dollar-cost averaging. However, if you’re the type of person that pays very close attention to your portfolio, then trying to find trending stocks is a great option for you. It all depends on your risk tolerance and time horizon.
With that said, how are you supposed to know which stocks are trending? Here are a few big events to look out for.
Trending Stocks on Upcoming Earnings
The easiest way to find trending stocks is to see which companies have upcoming earnings reports. An earnings report is when a company announces its most recent financial information. These reports usually happen four times a year. When a company is reporting earnings, it usually receives a lot of media and analyst attention before, during and after the announcement. Earnings announcements are a good time to make a short-term prediction on how a company is performing.
Keep in mind that stock prices are usually more volatile around earnings reports. Additionally, changes in price depend on how investors react to information, not necessarily the information itself.
For example, a company might announce that it beat its earnings expectations. This is great news. However, maybe the company didn’t beat expectations by as much as investors were hoping. Despite the good news, the stock could still fall. This happens quite often.
Upcoming Political Announcements
Business and politics are not necessarily supposed to be mixed. However, it’s inevitable that this happens. To identify trending stocks, keep an eye on what’s going on in the government. If you can correctly connect the dots between policy changes and how they will impact companies then you can make a lot of money.
Here are a few examples of political events that you could use to tweak your portfolio:
- Joe Biden and Donald Trump had very different political agendas. During the presidential race, many investors had two different portfolios set up. Each portfolio had different companies that would benefit depending on who won. When the winner was announced, they rushed to invest in the winner’s portfolio and trash the second one.
- Joe Biden has announced major initiatives for infrastructure and renewable energy. This will most likely be good for manufacturing and electric vehicle companies over the coming years. For example, check out these EV charging station stocks.
- In March 2020, the government announced a nationwide quarantine to slow the spread of COVID-19. This ultimately benefitted technology companies, whose business models favored the shutdown. It also damaged companies whose business relies on live crowds (entertainment, sports, concerts, etc.).
Of course, it’s impossible to predict what will happen with 100% certainty. However, these are three examples of how political announcements can influence stock prices.
Major Weather and Geographical Events
It’s important to remember that real-world events impact companies. This impact will then translate to increased or decreased profits for that company. This then translates to a higher or lower stock price.
Consider the following events…
Is there a massive hurricane coming for Texas? How could this storm impact companies that operate in this area?
Is a massive ship blocking the world’s biggest canal? How could this blockage impact companies that use this canal to ship products?
Is COVID-19 causing factories to shut down in third-world countries? How could these shutdowns impact companies that create products in these countries?
These types of scenarios have a big impact on specific companies. You can identify which companies will be impacted and how you can get ahead of the price movements.
Robinhood Trending Stocks Section
Another way to find the top trending stocks is to look for them in your brokerage account. Most brokerages will break down stocks into different lists. For example, Robinhood breaks down stocks into lists like “100 Most Popular” or “Upcoming Earnings.” Robinhood will also let you filter by which stocks are increasing or decreasing the most that day.
While this is a good starting point, the trending sections on brokerage sites can quickly get old. These stocks are also being broadcasted to thousands of other investors. This strategy also makes you reliant on Robinhood to provide you with information.
Here are some lesser-known opportunities on the trading app: Robinhood Stocks Under $1.
So how do you find new trending stocks to buy?
Using Social Media to Find Trends
I recently shared six of the best stock market movies to watch. In the movie The Wolf of Wall Street, there’s a scene where Jordan Belfort is pitching a stock. He tells his client, “by the time you read about a stock in the Wall Street Journal, you’re already too late.” Despite Jordan’s questionable business practices, he actually hits the nail on the head here.
By the time company news has made it to a major publication, it’s already been seen by tens of thousands of people. Investors have already seen it and the stock price will reflect this news. Instead of waiting, you should do your best to anticipate news updates before they happen.
This can be done by monitoring what people are saying and doing on social media. By keeping tabs on financial conversations on social media, you can get a sense of what might happen with a stock. In a way, this helps you find stocks before they are trending.
The easiest way to get started is to join the financial discussion. There are plenty of sites where people discuss stocks. A few of the most popular are Twitter and Reddit.
To help you get started, here are a few communities to check out:
Keep in mind that the goal is not just to follow major news sites like MarketWatch, Forbes and Business Insider. The goal is to follow other investors, learn from them and then make your own decisions.
A great example of how you can leverage social media information happened recently on Reddit. One Redditor posted a lengthy due diligence on r/WallStreetBets. The post was about the “buy now pay later” company Affirm. Somehow, they identified that Affirm might potentially partner with Amazon. The partnership was officially announced days later and the stock soared 40% on the news.
This is one example of how staying tuned into social media can help you uncover trending stocks to buy.
Another example is what happened with Gamestop. The potential for GameStop’s stock was uncovered by retail traders months before the stock made any major movements. Almost a year later, a short squeeze ensued and the stock price soared. There’s now an entire Reddit page dedicated to talking about GameStop stock.
This is a good time to mention that you should never just blindly listen to internet advice. This is because you don’t know the quality of the advice you’re getting. Always be sure to fact-check any stats. Do your best to poke holes in their investment thesis. Only invest once you feel confident in the stock.
Identifying Long-Term Trending Stocks to Buy
Trends can occur over the short, medium and long term. Something like a major weather event is a short-term trend that will have a short-term impact. A presidential term is a medium-term event. However, some trends are long-term cultural trends.
These are trends that will play out over the span of years, not weeks. For example, the shift from movie rentals to streaming. Or the shift from in-store shopping to eCommerce. Or the creation and growth of social media. If you identified any of these trends 10-20 years ago then you probably made a lot of money.
Here are a few examples of potential long-term trends:
- A shift towards remote work as a result of the pandemic
- A shift towards extended travel (again as a result of the pandemic)
- A shift away from higher education due to its rising cost (and the prevalence of free information on the internet)
- Cryptocurrencies replacing traditional currencies
- NFT technology creating an entirely new collectibles industry
- A shift toward electric vehicles and other renewable sources of energy
- The emergence of a space industry that didn’t exist previously
Identifying a long-term trend and investing in companies leading the way is another great way to find trending stocks to buy.
I hope that you’ve found this article valuable when it comes to learning how to find trending stocks to buy. As usual, all investment decisions should be based on your own due diligence and risk tolerance.
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About Teddy Stavetski
A University of Miami grad, Teddy studied marketing and finance while also playing four years on the football team. He’s always had a passion for business and used his experience from a few personal projects to become one of the top-rated business writers on Fiverr.com. When he’s not hammering words onto paper, you can find him hammering notes on the piano or traveling to some place random.