You’d Be Up 65% Since May If You Followed the ‘Guru’ Method

But guru ownership is just one of the many criteria Michael looks for when he’s screening stocks. In order to get a buy signal from Michael’s system, a stock also needs to show high relative strength (RS) and strong cash flow growth.

Relative strength measures the price trend of a stock compared to other stocks or to the market as a whole. Among the hundreds of guru stocks Michael identifies, he only considers those with a relative strength rank over 70, signaling that they have risen faster than 70% of the market during the prior six months.

Michael started eyeing Micron very closely since its RS broke above 70 earlier this year. Since that time, Micron’s RS rating has increased to 99.

The other variable in Michael’s equation is cash flow. Cash flow measures the amount of money coming into a business — the lifeblood of any company. They use this cash to grow the business or reward shareholders by building new factories, paying dividends and developing new products, among other things.

Few companies are better at generating cash flow than Micron Technology. In the past 12 months alone, the company increased its cash flow 240%. Over that same time period, only 1% of publicly traded companies were able to grow their cash flow faster.

Combine the company’s strong cash flow with its high relative strength, and Micron has been one of the market’s best-performing stocks this year. Anyone who bought on Michael’s recommendation in May would already be up 65%. And if you didn’t follow Michael’s recommendation, you might have a second chance at similar returns.

This article was originally written by Austin Hatley and posted on ProfitableTrading.

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