Everything around us is being segregated, sub divided label into classification for easy identification and the stock market is no different.
A recent evening investment seminar of a few hours shares some insight of stock selection. After all, there are hundreds of mine favourite to choose from compare to thousands of stock out there.
The area of focus on is call sector. Which sector is hot, which is not?
The first is to know what the market sentiment is. Is it bullish (up) or bearish (down) We don’t want to be cause buying a stock that look cheap when the sentiment is bearish or selling down a stock that is ‘overprice’ or seem expensive when the sentiment is bullish.
After which we move into which sector of the industry, just like GDP contribution making up of consumer, manufacturing, service and such. The more common one are Finance (Banks / Investment Firms), Property, (Developer / Hotels) to Transport , not to mention a hot sector call resources these days.
Next up, we identifying which sector is the leader (Sector that react strongly to market sentiment), we move on to identify which particular stock receive most attention. (The big capitalization company to the smaller one) Share price and daily trading volume and Company branding are a few common indicators.
Upon narrowing down our selection, the next thing we sniff around for in news indicating the sector we selected is still hot or is the sector changing. The term I was taught is call sector rotation which I’m relative green to it still. (Commonly used to describe deep pocket investors/ fund houses identify another sector of better return and shifting funds to that sector before retail investor does.)
In a more layman term is, look for the wave to ride on, get out before it crashes. This seminar shown me that stock buying is an art of screening and filtering. Not just buying evergreen stock that be around long and hold long for a small gain after all, inflation is in all time high again~
*I can only discuss basic as I only get the basic gist. Contact me if you like to help me out on the quest of understanding sector rotation.
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