The Smart Money Method: How to pick stocks like a hedge fund pro by Stephen Clapham

1: What Makes A Good Investment?

Introduction
 A good investment, in my view, is any stock which beats the market over a
 short or long period. In my professional career as an equity analyst at hedge
 funds, I looked for stocks which I beli eved either:
 would appreciate by 50% or more over an 18–30 month period, or
 had 20% or more absolute downside in a prevailing bull market.
 Of course, when you buy (or sell) the stock, you can only hope for the right
 outcome – my actual results fluctuated wildly. But there are a huge number
 of equities globally in which you can invest, and selection criteria such as
 this are a useful way of narrowing your field of endeavour.
 Routes to price appreciation
 For a stock to outperform (or do better than) the market – active managers
 are generally measured on their performance relative to a market
 benchmark, hedge fund managers are measured in absolute dollars – one of
 three things generally has to happen:

The Smart Money Method: How to pick stocks like a hedge fund pro by Stephen Clapham