IBD 100 - How to Get the Most Out of It

Don't just blindly buy stocks off the list. Here are a few points from a long-time subscriber and avid reader:

IBD claims that most stocks attain their top ratings (which afford them a coveted spot on the 100 list) before they break out. It follows then that each week the list should contain dozens of top-rated stocks ready to break out. But, strangely enough, stocks seem to take their sweet time to appear on the list, often half way or more through the advance. Even the black boxed ones don't usually look particularly enticing, and in any event there are usually only a handful of those.

Some stocks also tend to stay on the list longer than they should. I can only speculate as to why but it appears that:

- In a sharp downturn, stocks that have had substantial runups tend to command the top ratings relative to other stocks, even though they themselves are in a pronounced downtrend.

- You can't have 100 top rated stocks in every market. Sometimes, the list has 30-40 "fillers" to round out the number.

- Some stocks seem to become IBD's darlings. Whether that's because they've been recommended to O'Neill & Co's institutional clients, or because the editors have fallen in love with them (hiding behind the proprietary ratings), I don't know.

But even with the above drawbacks, IBD 100 is one of the best investment tools out there.

Chart Patterns

Every stock on the list broke out at some point. Study their charts to apply past patterns to future breakouts.

Top 10

Some investors have had success with simply buying and holding the top 10 stocks from the list. Just don't try it in a declining market.

The $15+ Club

The minimum price for inclusion is $15.00. Momentum traders watch for fresh $15.00+ names to show up on the list that they can run up fast. Some astute traders buy $10.00+ stocks with IBD 100 ratings on the premise that they are is more likely to run up to $15.00 in the expectation of inclusion. This strategy can be very profitable but if a stock fails to hold the $15.00 mark or does not make it to the list on a Friday - watch out below!

The Sell Side

Interestingly, deletion from IBD 100 does not hurt a stock. Oftentimes, a new stock with IBD 100 ratings will flicker on and off the list before establishing residency there. If you bought right and the stock is acting right - sit tight, the IBD 100 will catch up with you.

Industry Groups

IBD is very good at detecting industry rotation early on. If IBD is adding or deleting oils or retailers, take note. A
powerful industry move could be on the way