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In times of turmoil, it can be hard to know what lies in store for stocks. But using the same approach as some of the world's most influential strategists could help you track down those worth taking a closer look at.
Over several decades, finance academics and market professionals have reached a consensus about what really makes some stocks perform well (and others perform badly). They've pinpointed a handful of 'factors' that have become well-understood drivers of stock market profits.
Standing on the shoulders of these giants could help you track down shares with the potential to outperform - and one share that at first glance has some exposure to these drivers is Northern Bear (LON:NTBR)...
Choose high quality over junk
Some of the most influential stock market studies have found that Quality is an important factor that tends to show up time and time again...
Companies with a track record of profitable growth, high efficiency and solid finances, have been shown to be better bets on average than low quality, loss-making firms.
By our calculations (which use a range of financial quality metrics) Northern Bear has a Quality Rank of 94 (where zero is poor and 100 is excellent).
Opt for cheap over expensive
Another well-research observation is that attractively valued shares tend to outperform expensive shares on average over time. So it's important to look at Value and whether a company is being fairly priced relative to what it earns, owns and what it pays out.
By our calculations (which look at several valuation metrics) Northern Bear has a Value Rank of 87.
Look for a positive trend
It's easy to think that Momentum is only a measure for technical traders, but research once again shows that recent trends in both price and fundamentals can be a strong hint about the future. In the market, trends tend to persist, so it makes sense to look for stocks that are on an upward trajectory.
By our calculations (which look at both price and earnings momentum) Northern Bear has a Momentum Rank of 76.
Overall, there are signs here that Northern Bear has above-average exposure to three very important drivers of stock market profits...
What does this mean for potential investors?
Good quality shares that are well priced and rising in the market have very broad appeal. But there are no guarantees. Finding bullet-proof shares is difficult - and we've identified some areas of concern with Northern Bear, which you can find here. Knowing the warning signs and being aware of weakness is essential if you're going to preserve your wealth.