All investors want to find the top stocks to buy now—and here’s how we think you can do it

No one can say for sure what the market will do next. However, if you ask investors who have a few decades of successful investing behind them, few, if any, will credit their success to any one investment or investing technique. Instead, most will talk about the value of everyday qualities like patience, consistency and a healthy sense of skepticism. In short, they’re the kind of qualities that bring success in all aspects of life, not just investing.

These qualities help you apply our three-part Successful Investor approach to finding top stocks to buy now: invest mainly in well-established, dividend-paying stocks; spread your money out across most if not all of the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; and Utilities); and downplay stocks in the broker/media limelight.

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Top stocks to buy now: But should you buy now … or wait?

There’s no easy answer to the buy-now-or-wait dilemma. At times it may pay to hold off—for instance, a company’s stock will often rise when it announces a stock split, then fall after the split takes effect.

In the end, our Successful Investor stock trading advice is that if a stock is truly worth investing in, you should be willing to buy it at current prices, even if that means you run the risk of having to sit through a 5% to 10% setback. After all, before it puts on that next 5% to 10% setback, it may first go up 50% to 100%.

Top stocks to buy now: Profit from savvy stock selection rather than stock market predictions

Investors who succeed over decades—the Warren Buffett types—rarely, if ever, talk about spotting market tops and bottoms. They are far more likely to talk about successful investments than wondering when is the precise moment to buy. Most have come to see, often after a period of costly stock-trading errors, that you make most of your stock-market profits through stock selection rather than stock market predictions.

Top stocks to buy now: Blue chip stocks

We recommend that most investors hold the bulk of their portfolios in blue chip stocks. That’s because blue chip shares offer potential for capital gains growth as well as regular dividend income.

Blue chip stocks are big, well-established, dividend-paying corporations with strong business prospects. These are companies that also have sound management able to make the right moves to keep competing successfully in a changing marketplace.

The blue-chip dividend yield is certainly one of the most concrete indicators of a sound investment. It is the percentage you get when you divide the current yearly dividend payment by the share or unit price of the investment. It’s an indicator we pay especially close attention to when we select stocks to recommend.

Top stocks to buy now very often come with hidden assets

Most investors overlook hidden assets. The classic example is real estate that is worth a lot more than its balance-sheet value (which is usually the purchase price, minus depreciation on the buildings).

Another source of hidden value is successful research and development spending. These outlays get written off against current-year income, much like day-to-day expenditures such as rent and utilities. This accounting treatment depresses current earnings. But if the research turns up anything of value, it adds to long-term profit.

The best time to find hidden assets is when they’re still hidden, long before the company begins taking steps to profit from them. Understanding and seeking out hidden assets while you’re evaluating a stock can add enormously to your profits in the course of an investing career. But you need patience to profit from them, because they can stay hidden for a long time after you buy.

Hidden assets can also cut your risk. Stocks with hidden assets are likely to hold up better than those whose assets are easier to spot, since they are the last stocks that experienced, Successful Investors sell. When times are good, on the other hand, stocks with hidden assets tend to do better than average. Good times give them opportunities to put their hidden assets to work.

Top stocks to buy now: Value stocks

Top value stocks are reasonably priced, if not cheap, in relation to sales, earnings or assets. They are perceived by investors as undervalued but have the potential to rise.

When you look for stocks that are undervalued, it’s best to focus on shares of quality companies that have a consistent history of sales and earnings, as well as a strong hold on a growing clientele.

What factors persuade you to buy top stocks when you see them? Have you fallen for attractive, but disappointing picks in the past?

What are the characteristics of a top stock pick, in your opinion?