Ahead of the Curve: Nine Simple Ways to Create Wealth by Spotting Stock Trends

09/01/2007 12:00 am EST

Focus:

Peter Lynch

Vice Chairman, Fidelity Management & Research Company

This is a little book that packs a lot of punch! Not since I first read Peter Lynch’s One Up on Wall Street in the early 90’s, have I seen such a treasure of common-sense investing advice packaged in an easy-to-read manner.

Hilary Kramer expands on Lynch’s ‘buy what you know’ approach, by outlining nine key strategies to spot developing stock trends, designed to make you wealthy.

She likens this profitable trend-spotting to good surfers waiting for the perfect wave, jumping on and riding it to their satisfaction. That means being aware of their surroundings and perceiving the wave before it crashes around them—a perfect analogy for investors

Like most good financial advisors, Ms. Kramer suggests the key, personal steps necessary for all investors to achieve success: know your investing time horizon, consider your current and future financial needs, diversify, do your homework, minimize investment fees and costs, and don’t forget about tax consequences.

Ms. Kramer outlines beginning your trend-spotting with a macro-overview, recommending a broad approach that will enable readers to see the bigger picture that portends new trends that may be very profitable.

One particular tenet she advocates is fairly unique in the financial business. Unlike many advisors who recommend jumping on the most popular companies leading a trend, Ms. Kramer recommends seeing beyond the folks out front, to the unlikely suspects that are benefiting from the ripple effect of the trend—those companies doing business with the leaders.

Like Lynch, she stresses the importance of knowing what is going on around you by doing the things you do everyday, including shopping, eyeing the products and services teenagers, your neighbors, and celebrities are buying. She goes further, suggesting that you take advantage of the media—really see those TV ads, get a feel for what the Internet community is excited about, listen to the radio, read the headlines in your newspaper—and you will begin to see patterns and emerging trends.

You will uncover investing ideas by paying attention to political and economic events—domestically and globally, as well as changing demographics. Consider: are there new regulations that will possibly spur the development of new products? How have hurricanes created opportunities for investors? Which cities and countries around the world are undergoing tremendous growth? What products will be needed to sustain that expansion? Which industries are being deregulated; what patents are expiring; where are your tax dollars going; what health care discoveries may be on the verge of breaking out?

You can see easily how one question leads to another—which will hopefully, spur some great investment opportunities.

Ms. Kramer also addresses taking advantage of the trends that occur as a result of human behavior, including our quest to live forever, to be happy, and to belong. All of these desires create opportunities for companies to develop products to meet these needs, many of which may become exciting investment ideas.

Along those lines, she encourages investors to employ their creativity and imagination, to consider their wants and desires, as well as problems that need to be solved. She suggests that this type of thinking may point out gap areas that, if filled, may address and satisfy these issues, and perhaps create investment opportunities.

To prevent you from running off onto unprofitable tangents, Ms. Kramer also proposes suggestions for spotting the peaks of trends and determining whether you truly are encountering a trend or just a fad.

And of course, you can’t forget the investment basics. Once you’ve identified a real trend and some possible investment opportunities, you must do the numbers. Ms. Kramer emphasizes the importance of investing in sound companies and outlines a concise list of the financial basics that are critical in analyzing any investment.

If you would like to put some oomph back into your portfolio, by learning to think out-of-the-box, this little book may just be the perfect tool to expand your investing universe.

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