Here's the best way to spot stock-market winners, according to this 25-year tech analyst

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OPINION: My experience has taught me that the highest-quality companies have almost always been the best-performing stocks over a long-enough period – say, one to two years.

High-growth tech stocks seem particularly volatile these days, driven high and low by rising and receding fears related to interest-rate rises and COVID waves. It’s enough to make the average investor forswear the tech sector.

My best advice for mitigating these two risks is to hunt for DHQs, or Dislocated High-Quality stocks. By dislocated, I mean stocks that have declined 20%, 30% or more from recent highs. Now there’s a fair amount of judgment required here. A 20%-30% correction off of a rapid 100% appreciation spike isn’t that dislocated.

TAMs are the end markets that companies are addressing. Google’s revenue model has been predominantly driven by advertising revenue since its inception. That means its TAM is global marketing spend, especially given the broad range of advertising solutions the company offers and its global ubiquity .

There is a very useful expression in investing that goes along the lines of past performance is no indicator of future success. Well, I don’t think that’s true when it comes to product innovation and management teams. Management teams that successfully generate product innovation usually have something in their corporate culture, organizational structure or personnel that allows them to continue to innovate successfully.

 

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