when you're buying stocks it can be tempting to have a bias towards popular
stocks or those with top-tier name recognition like Netflix or like Cisco
but the name alone won't guarantee big gains in your portfolio that's why it's
important to filter out the noise and combat your bias by leveraging data and
charts to help you make your buying decisions so today let's go over IBD's
tips for buying large cap stocks now of course this is a great guy to use when
you're considering any stock to buy but it's especially important to keep in
mind when you're looking at these bigger popular stocks to make sure your
emotions don't get in the way so first don't buy stocks simply because they're
widely held take GE for example that's one of the most actively traded stocks
in the market even though shares have essentially been in a freefall for the
past two and a half years and growth has slowed tremendously now the company is
trying to turn things around but it hasn't been able to do so yet so instead
of buying a big-name stock that looks cheap analyze the chart and fundamentals
first fundamentals are key because stocks follow their corporate earnings
remember it's ideal to see bottom line growth of at least 25% and it's even
better when that growth shows acceleration and the chart is important
because our research shows that buying stocks that are already in up trends
increases the likelihood of profiting from that trade now keep in mind of
course that timing when you sell is just as important as timing when you buy now
making sure the chart in the fundamentals are up to snuff also
prevents you from getting carried away with the story of a stock this is where
Tesla is a great example Tesla is no doubt an innovative company with a great
story but the stock is now trading at the same levels it was all the way back
in 2014 so if you held that stock for five years it's essentially gone nowhere
as the company continues its cash burn okay so now let's put Apple and
Microsoft head-to-head to demonstrate another concept here don't expect
leading stocks will always be leaders and don't expect lagging stocks will
always be laggards so to explain this let's first take a look at a weekly
chart of Apple now Apple is a longtime holding in many portfolios of course but
or position traders the stock is flashing some weakness Apple staged a
breakout over a cup with handle based several weeks ago but shares hit
resistance to by point and quickly turned tail amid broader market weakness
the next week Apple triggered a sell signal by falling more than 7% below the
proper buy point that means this buy point is no longer valid even though the
stock is trying to rebound now the we chart action comes amid fundamental
weakness to Apple has now seen two quarters in a row of declining earnings
and sales growth is also week amid waning iPhone demand so in short just
because Apple has been a big winner in the past investors shouldn't
automatically expect it to be a leader now and moving forward now Microsoft's
chart on the other hand shows somewhat of the opposite picture after peaking in
the dot-com era it took Microsoft near at least 16 years before it reached new
high so Microsoft was a long-term laggard
until about three years ago earnings and sales growth has consistently been in
the double digits over the past year and the chart looks strong you can see how
compared to Apple shares of Microsoft were able to hold up much better in the
queue for 2018 correction Microsoft broke out of a cup with handle base in
late February and after a 22 percent run shares formed and broke out of another
base and Microsoft is currently trading within the 5% buy zone as it seeks
support at its 10-week line so all in all don't let a personal bias or
preconceived notion get in the way of finding the best stocks at the right
time and instead of buying an individual big cap stock that's a laggard your
portfolio would be better off buying an ETF that contains an array of large cap
stocks as its holdings we'll talk about what exactly the QQQ etf offers
investors when we come back