I hear it almost every day…
“If only I bought that stock two weeks ago… two months ago… or even two years ago!”
When we look at stocks that have traded higher, it’s human nature to think that we missed out on the opportunity.
But the truth is that stocks that have already moved higher tend to keep moving higher for much longer than many people expect.
In fact, it’s often best to wait until a stock has already traded higher before you start buying your shares.
This helps to make sure that momentum is strong so you won’t get stuck holding a stock that’s going nowhere.
Today, I want to show you how to tell if a stock still has plenty of room left to run.
And I’ll highlight two important stocks that have already started trading higher — and should still give you some tremendous profits this year.
Let’s jump in!
Stocks That Make New Highs Continue Higher
I’ll never forget my early days as a hedge fund manager. I was given a small amount of capital to invest and was watched carefully by my mentor.
Bill founded the company 15 years prior and was a very successful investor.
The lessons I’ve learned from Bill continue to help me book profits in the market and show you where the best opportunities are.
One day, I got called into Bill’s office to look over the trades in my account. I was particularly proud of one stock I sold for a quick profit.
But to my surprise, Bill wasn’t happy at all.
“Why’d you sell that one, Zach? The stock just made a new high. I would expect you to buy more, not sell!”
Bill was absolutely right.
Just because the stock moved to a new high didn’t mean that I needed to sell it. But in my haste to book a profit, I missed out on some much larger gains this position would have made.
Having patience with stocks that keep rising is difficult.
If you own a stock making new highs, it can be incredibly tempting to sell too early and lock in your gains.
And if you’re watching a stock make new highs, you might think you missed your chance and look for other opportunities.
But the truth is that stocks hit new highs for a reason!
It’s typically because the company is growing or accumulating profits and investors are getting more excited about owning this play.
These kinds of trends can take months, years, or even decades to complete.
So it’s important to buy your shares and hold on for the ride. And that’s exactly what we’re going to do today with the two plays I want to show you.
As Investors Embrace Value Stocks, These Two Winners Should Soar!
Over the last few months, we’ve seen investors start moving money out of some of the most popular growth stocks and into some of the most valuable stocks on Wall Street.
This rotation has caused some big changes in the way stock prices move. And shares of some of the most stable companies have been pushed higher.
Take a look at the charts of two important value stocks below. Tell me, do you think it’s “too late” to invest in these names?
This is the chart of Ford Motor Co. (F), which has roughly tripled over the past year.
And here’s a chart of General Motors Co. (GM), which has gained more than 200% this year.
Could these two stocks possibly have further to go?
There are a few important reasons why both F and GM could still have a long way to go, giving you a chance to build your wealth from two iconic auto manufacturers.
To start, I should tell you that vehicle sales have been surging this year!
As the economy starts to reopen following the coronavirus crisis, consumers are spending money on new cars.
A strong job market, stimulus payments and low interest rates are all combining to make cars more affordable and accessible to Americans.
And with both GM and Ford now offering exciting electric vehicle (EV) options for buyers, both companies are starting to benefit from the EV excitement that Tesla has started!
The second reason these two stocks should continue to surge higher is the deep value offered to investors. When you buy shares of either company, you’re getting a tremendous deal!
Ford is expected to earn $1.60 per share next year. With the stock trading near $12.50, you’re paying less than eight times next year’s earnings to own shares.
To put that number into perspective, the broad S&P 500 is trading closer to 22 times next year’s earnings.
Even if Ford just moved back up to 12 times next year’s profits (which would still be an attractive value), that would give you a 50% gain.
And if profit expectations continue to move higher as I expect they will, a price that reflects 12 times expected earnings would give you an even larger win!
On a similar note, GM is expected to earn $6.27 per share next year.
So with the stock trading close to $60, you can buy shares at less than 10 times expected profits.
Again, that’s less than half the average value for the S&P 500. And as investors move more of their capital into value stocks like GM, the stock price should soar!
The third reason these shares could keep moving higher is a restoration of dividend payments.
Both GM and Ford suspended their dividend payments during the coronavirus crisis.
It was important for the automakers to keep cash on their balance sheets until it was clear how the pandemic would play out.
Now that the economy is recovering and car sales are surging, I expect both GM and Ford to reinstate their dividends.
And that means both of these iconic stocks will once again become reliable income plays.
With so many investors looking for ways to boost their income, these stocks will become much more popular once they begin paying dividends.
And that popularity is just one more reason investors will buy shares and send the stock prices even higher.
So today, I want to encourage you to take a page from the lessons Bill taught me at the hedge fund.
Don’t get too impatient with stocks you own that are making new highs. Sometimes sticking with those plays can lead to gains that are larger than you would have imagined!
If you’re on the sidelines and think you’ve missed out on a move, consider how much farther a stock could trade.
In many cases, stocks that make news highs will continue their positive trend. So don’t be afraid to jump in!
GM and Ford are both great examples of stocks that are making new 52-week highs and yet still represent great value for you as an investor.
Consider adding shares today!