Lesson : How To Use The IBD 50, Minis To Find Big Stock Winners

Finding a stock like Google (GOOG), Home Depot (HD) or Microsoft (MSFT) in the early stages of their big runs can help you accomplish those goals. What feature in IBD can help your search?
A very good place to start is the IBD 50, a computer-generated list of top growth stocks.

These are not pure momentum stocks. They're selected based on key fundamental criteria such as earnings and sales growth and the quality of price performance. The list appears in the B section of IBD every Monday and Wednesday and includes a column of commentary. In IBD Leaderboard, the IBD 50 is updated every day.

The IBD 50 saves you time because it does the screening for you. Every Monday, IBD also highlights two stocks from the IBD 50 in the form of mini columns. They discuss each stock's fundamentals, the company's business and its competitive strengths.

Each mini column is accompanied by a chart, which includes long-term annual earnings growth and other statistics that provide clues to a stock's potential. Often, the stocks either are working on bases or are near buy points. Find a brief chart analysis at the bottom of the chart. Learning how to analyze charts helps you become a better investor.

Web.com (WWWW), a provider of website publishing and e-commerce services for small and midsize businesses, was featured in an IBD 50 mini on Feb. 19. The chart that went with the story showed that Web.com sported a 91 Composite Rating and a 97 Earnings Per Share Rating, just shy of the best-possible 99.

The chart analysis said it was near a possible 19.21 buy point of a long base. Instead of immediately clearing that buy point, Web.com went on to form a flat base with an 18.57 entry. It broke out on May 3 in huge volume. At the time, its Composite and Earnings Per Share remained strong at 91 and 96 respectively.
From the breakout, Web.com ran up its 10-week line, hitting a high of 33.70 on Oct. 4, good for an 81% gain in just five months. Shortly after, the stock crashed through its 50-day line in heavy volume and now appears to be working on a new base.

Dunkin' Brands (DNKN) has done well since it appeared in an IBD 50 mini column Jan. 7. Not long after, on Jan. 31, it crossed resistance at about 36 in the week ended Jan. 18 and has since risen along with its 10-week line. It's up 33% so far and hasn't yet triggered any major sell signals.

Don't buy a stock just because it's in the IBD 50. Make sure to scrutinize the stocks to make sure they conform to IBD's fundamental and technical characteristics as they cross buy points in sound bases. Also, make sure the market is in a confirmed uptrend before buying.