7 Signs that a Stock Value is about to Increase in the Long Term

If you want to trade or invest stocks, one of the most important skill that you should know is detecting that a stock value is about to increase. In most cases, most traders are unaware and merely relies on speculations and insider information. This is wrong information and a single mistake can cost you a lot.

In this article, let’s present all the important easy to recognize signs of an increasing stock value. Let’s get started.

Sign #1: The Stock Hits the Bottom

One of the most important indicator is when the stock hits its lowest value. Now this is what separates a professional investor from a amateur investor. Professional stock traders know that a bottom of the stock is its support, the price is at the cheapest level and most likely attracts a lot of buyers/investors resulting to an increase in value.

Amateur investors on the other hand, think that since the stock hits the bottom. The value is very low or very poor. For them, it indicates a poor stock to invest. The truth is that, when the stock hits its bottom, there is no other sensible trend in the future but for it to grow!

So invest when the stock is still cheap. In technical analysis of stocks, this is usually the V-bottom as indicated in the screenshot below:

These are times when the stock is at its cheapest level. Sometimes you need patience to wait for this.


Sign #2: The company is expanding

When the company is profitable, it expands. So as the value of its stock. You need to read the news of companies that you would like to invest. And be guided with the following questions:

a.) Do they have news of expanding their current business operations in other locations?

b.) Are there any good news about increased profits or revenues in their last quarter report?

c.) Do they have plans to raised more funds so that they can cater lots of customers in the future by building more manufacturies and offices?

d.) Are they hiring constantly? What is the company employment turn-over rate? If they are hiring constantly because they new employees are needed for the expansion instead of replacing resigned employees then take that as positive sign of growth.

Sign #3: The CEO is praised by the media for a job well done

This is funny but its true. Do you remember the time when media start praising Steve Jobs for the job well done for Apple Inc? It is a sign that the CEO is doing an excellent job for the company and the media is acknowledging the company good performance in the market. The CEO performance is a strong indicator of the company performance in the long term.

Thus, it is a good sign that the company is positioned to be highly profitable in the coming future. A poor performing CEO means that the company is at risk of losing valuable dollars in investment and will not be able to compete in the near future. In return, the company stock performance will be poor or in sliding trend.

This is what happen to Nokia Corporation:

If you search for news between 2008 and 2012, you can read a lot of news about their CEO being under fire.

Sign #4: Lots of happy customers and overall positive consumer feedback

Customer is the life and blood of any corporation. Without them, there is no reason why the business should exist. If you read a lot of praises from their customers (as you search the net, read in news or read anywhere like in a forum), it is a sign of a good performing company with quality products.

Sooner or later, that will translate to a positive increase in the company stock value.

Sign #5: No heart-breaking cost cutting initiatives

Cost cutting is a normal activity of any corporation. For example, six sigma projects are cost cutting projects aimed at reducing cost in the manufacturing/any business activities that results to increase in profit.

But this is different from a heart-breaking cost cutting initiative such as:

a.) Firing massive amount of employees to reduce labor cost.
b.) Closing lots of factories.
c.) Stopping the innovation in an effort to reduce R&D cost.
d.) Discontinuing lots of products and services where there are still loyal customers or users.

If the company is doing some heart-breaking cost cutting action, the stock would start sliding to a down trend. Not good time to invest.

Sign #6: Continued Innovations

If the company is continually releasing new products and services, it is a good sign. Continued innovation is a good indicator of increased stock value.

The moment the company stops innovating, it is only a matter of time when a determined competitor will wiped them their very existence. Good examples:

a.) Nokia unable to response to Apple iPhone innovations
c.) MySpace unable to compete with social networking innovations to Facebook.

Sign #7: No drastic change in management in respond to poor company performance

If you read some news on massive restructuring/shuffling of the company organizational structure, it is a sign that the company is experiencing some crisis that could be traced to its employees, managers and overall job performance.

This can result to poor performance in stocks in the coming months. A stable organizational structure is necessary for success of the company.