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Redde Northgate passes this 3-point stock market strategy

20th Jul by Ben Hobson

Covid-19 has been a stark reminder of how unpredictable events can leave stock market investors feeling sucker-punched. Over time, researchers have strived to strike out these risks by pinpointing the drivers that can insulate investors from the very worst drawdowns... 

Their answer is what we call 'factor investing' - and it's something that investors with an interest in Redde Northgate LON:REDD might be interested in.

In recent decades, finance academics and market professionals have broadly agreed that stock market outperformance is influenced by a handful of important 'factors'. Using these ideas could put you on the right path to finding shares with the above-average chances of beating the market...


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) Redde Northgate has a Quality Rank of 87 (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) Redde Northgate has a Value Rank of 88.

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) Redde Northgate has a Momentum Rank of 96.

Overall, there are signs here that Redde Northgate 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 Redde Northgate, which you can find here. Knowing the warning signs and being aware of weakness is essential if you're going to preserve your wealth.

Alternatively, if you'd like to find more shares that enjoy strong exposure to these vital drivers of stock market profits, just come and take a look at this Quality, Value & Momentum screen.

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