Stock picking can be tough and isn't just a case of picking which company is expected to grow the most or deliver the biggest dividend. Often, investors will find that the share price has moved sharply upwards before a decision is made to buy.
The pain of missing out on previous gains is a big contributor to one of the biggest mental hurdles for investors; buying when the share price is at all-time or 12-month highs. Investors need to remember that the share price should be assessed on the merits of value, not on value relative to the previous high.
An Example
Just look at Liquefied Natural Gas Limited (ASX: LNG)! The share price rose 100% between March and May 2014, keeping many investors on the sidelines for fear of losing capital. Those that did stay on the sidelines have missed the 330% jump between May and now!
Don't Miss These Winners
Three companies that are hitting new highs regularly and have favourable outlooks are:
M2 Group Ltd (ASX: MTU) shares have rocketed 33% from $6 to $8 in the space of six weeks. Analysts have been highly complementary about the ability of M2's management team to integrate several acquisitions to send revenue over the $1 billion mark. Underlying profit increased by 60% and the final dividend rose 45% to represent a trailing yield of 3.2% fully franked. More growth is expected in 2015.
G8 Education Ltd (ASX: GEM) has just retreated from an all-time high of $5.63 hit last week. The group is aggressively purchasing childcare centres all around Australia in an attempt to consolidate the industry, which is dominated by companies holding fewer than 10 centres. G8 relies on efficiency of scale by spreading overheads across multiple centres to lower overall costs. This is driving good margins and profit growth.
Finally, Blackmores Limited (ASX: BKL) recently hit a 12-month high of $33.25, but yesterday fell by 5% for no particular reason. The group's range of health products for humans and animals is being rolled out successfully in Asia and will drive group growth in coming years as it marches towards its all-time high.
