Okay, so it’s not like this is a step-by-step, hold-your-hand template for picking stocks that’ll have you getting rich overnight and riding off into the sunset in your brand new Lamborghini. Anybody who knows anything about the financial industry will know that no such thing exists, unless of course you’re involved in insider trading, which is highly illegal!
Instead, this is a strategy that will ensure you always give yourself the best chance of making some good returns on the positions you take, whether you’re a day trader or more of a longer-term player of the markets, but more so if you’re in it for the long-term…
Pick a specialist niche
A specialist niche is NOT something like special paint that’s manufactured and mixed specifically for painting toy soldiers, or something obscure like that. Rather it’s just narrowing your focus down to a specific market that you want to target with your stock picks. That market must be around some kind of economic activity involved with solving a specific problem, filling a specific need.
So you have to zone-in on a product that’s produced or a service that’s rendered to solve a specific problem or cater to a specific need. At this stage forget about stock picks and just focus on the targeted gap area, with the best option being that of one which you’ve identified in your own life.
Follow the value-chain
Next, identify the concentric elements which form part of the value chain that leads up to the creation of the solution for the problem you’ve identified. Various markets will come to mind, such as manufacturers, service providers, suppliers, marketing channels, etc. Study everything that has to do with this value supply chain and it’ll become second nature to pick positions according to what can be classified as sentiment-trading and investing.
A market-specific example
Let’s demonstrate with a real-world example of a specific market, which is the construction industry. If you’re up-to-speed with the typical business cycle of the construction industry, you’ll know all about when to anticipate busy periods and the quieter ones, which will allow you to pick stocks and positions to take up.
This is where the winners and losers are separated though, because you won’t get your big pay-day by doing what everybody else is doing! The type of data you’ll need to acquire and analyse isn’t that which you can get from watching the likes of Bloomberg, as good of a business news source as they are. Rather, you’ll need to take a leaf out of the books of forward-thinking stock traders and investors, such as those who might consult with some North London Accountants who perhaps specialise in the construction industry, purely for the kind of information those accounting firms typically use to generate data-driven reports like their whitepapers and research analysis. You don’t have to be in the construction industry, with your own construction company, to consult with these types of specialist experts. Paying for their time can yield just as much value as that which is attained by organisations that are operating at the core of the construction industry.