How to Find Stocks From Leading Industry Groups

I only trade stocks with an industry group rank between 1 and 100 as per MarketSmith ratings.

MarketSmith splits the entire Indian stock market into 197 industry groups.

All these groups are ranked as per their previous 6 months performance.

I only focus on the top 100 industry groups.

If a stock has an industry group rank between 1 and 40, it is a delight for me.

However, if the rank is between 41 and 100, I dig a little deeper.

I check the group rank of the stock 6 months ago vs today.

Example: If 6 months ago, the rank was 89, but today it is 53, that's a nice improvement.

This stock would find a place in my watchlist.

If the rank has worsened, I am out.

If a stock has industry group rank between, 101 and 197, I outright reject the stock.

I am not saying, stocks in those groups won't do well.

All I am saying is that, I want to put the odds of success in my favor.

Because, William O' Neil has already documented the fact that:

The strongest of all stocks emerge from leading industry groups.

Because of this simple filter, I have been able to save a lot of time in my analysis.

I don't need to do any sector rotation analysis.

The rank captures it automatically.

I don't need to study the chart of the industry.

The rank captures it automatically.

I don't need to subscribe to industry publications.

The rank is based on price performance of stocks in an industry group.

Hence, any group that is gaining traction will automatically get detected in my system.

Thanks to O' Neil and MarketSmith team, I always find myself on the correct side of the market.

Quick moral of the story:

Industry group rank (1-40): I am game.

Industry group rank (41-100): I might play if the rank is improving.

Industry group rank (101-197): I am out.

Sector analysis done in seconds.

Simple.

Got it ?

Regards,

Rohit Musale, CFA

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