Advanced Medical Solutions (AMS)
AMS specialises in the development, manufacture and sale of advanced wound care, wound closure and sealant products. The company makes money through it's branded products LiquiBand, ActivHeal and Resorba, with around 80% of sales from Europe (mainly UK and Germany). The group more than doubled it's revenue in the past 3 years while margins have advanced from 17% in 2009 to 24% last year, significantly boosting their net income. The company has confirmed it's previous revenue guidance of 57.5 million and pre-tax profit of 13.2 million, up 9% and 30% respectively. They expect to pay down all their debt by the end of 2013. AMS stock is up 69% in 2013, but I'm still long as it offers great value given it's prospects.

Associated British Foods (ABF)
Associated British Foods is a diversified international food, ingredients and retail group operating in 47 countries. It is the owner of several famous brand names including Twinings tea, Ovaltine, Primark and British Sugar. The company has achieved growth through the guidance of the the founding Weston family, which still holds a large interest. The stock is up 58% in 2013, pays a small dividend, and recently beat analyst estimates on both revenue and profit. It is mostly a food business, but their retail brand Primark grew revenues by 22% represents now 25% of the company and is expected to open 20 more European stores in 2014. I like to own market leaders and ABF is one of them.

Blinkx PLC (BLNX)
Blinkx is simply the world’s most advanced video search engine. They link viewers with content publishers and distributors, and monetize those interactions through advertising. Their technology was developed by Cambridge University and is protected by 111 patents. The company has more than 900 partnerships, including the video search for AOL and Lycos. BLNX has grown revenues by more than 70% in the past few years, and stock was up more than 200% in 2013, being #14 on the list of best UK stocks of 2013. My strategy is to buy only the best stocks for a fair price, if you are looking for the same, Blinkx is still undervalued and has plenty of room to fly given it's patented technology and the millions of videos posted daily. 

BTG PLC (BTG)The Company is focused on three business areas: Specialty Pharmaceuticals, Interventional Medicine and Licensing & Biotechnology.  They have invented Magnetic Resonance Imaging and currently license a large part of the world. Recently, FDA approved their drug Varithena, which is the only available treatment for varicose veins. There are approximately 30 million adults suffering from this condition in US. In the last earnings announcement (November 2013), BTG recorded a revenue and EPS growth of 17% and 21%. The stock was very quiet during the year, but shot up after the announced FDA approval, and scored a gain of 71% for 2013. 

Hargreaves Lansdown (HL.)
Hargreaves Lansdown PLC is a leader in investment management products and services to private investors in one of the largest financial centers in the world, United Kingdom . The Company's flagship service, Vantage, is UK's largest direct-to-private investor investment supermarket and commands a market share of 28%. Vantage offers clients the administrative convenience of being able to hold and manage their investments, including unit trusts, open ended investment company, equities, bonds, investment trusts and cash, irrespective of the tax vehicle, in one place with consolidated valuation reports. The company is growing by double digits, with profit margins and ROE above 50%, which are numbers usually seen at technology companies. 

Management is superb and has done very well despite the bad financial environment in UK, growing revenues by more than 20% during the worst meltdown in 2008. The founders, Peter Hargreaves and Stephen Lansdown still hold a controlling interest in the business. HL. stock has advanced almost 100% in 2013, but bright days still lie ahead, the company is capturing market share from competitors rapidly and coming up with new products. 

Hikma Pharmaceuticals PLC (HIK)
Is a pharmaceutical company with more than 35 years of history and an established position in the MENA (Middle East and North Africa) region (45% of sales) and US (46% of sales). Their products are marketed under divisions: Branded (40%), Injectables (38%) and Generics (22%). The injectables division ditributes more than 180 products, Branded has more than 600 products, which are mostly licensed from global pharmaceutical companies, which recognize Hikma's strong position in the MENA region. The company has steadily grown by 20% each year, has ROE of 16% and no debt. Their future growth will come from the generics business (Doxycycline grew from 10 million USD in  December 2012 to over 100 million in June 2013), licensing of new products and acquisitions. Hikma stock ended year 2013 57% higher.

Hutchison China MediTech (HCM)
Chi-Med is the holding company of a pharmaceutical and healthcare group based primarily in China. Chi-Med is a subsidiary of Hutchison Whampoa Ltd. ("HWL"), one of the largest conglomerates based in Hong Kong. Chi-Med focuses on researching, developing, manufacturing and selling pharmaceuticals, and health oriented consumer products primarily in China. The company has a global licensing deal with AstraZeneca on Volitinib, and it's the first deal of this type to progress a China discovered targeted oncology drug towards the global market. The company earned a $20 million upfront, with additional $120 million after successful achievement of clinical development, and in the marketing phase a double-digit share of revenues and profits. 

China represents 20% of the world's population, but only 1.5% of the total drug market. As such, Pharmaceutical companies are on the rise, and HCM is well positioned to profit from this trend, already gaining 48% in 2013. Recently, Chi-Med announced a joint venture with Sinopharm Group, the largest distributor of pharmaceutical and medical products in China. If you like small cap stocks with explosive potential, this one is for you.

RWS Holdings PLC (RWS)
RWS is a provider of intellectual property support services and high level technical, legal and financial translation services, for companies in the pharmaceutical, chemical, aerospace, automotive, defense and telecom sectors. It provides services to 12 of the world's top 20 applicants at the World Intellectual Property Office in 2011 and 14 of the top 20 applicants at the European Patent Office in 2011. 

Main growth will come from the acquisition of inovia, a web based patent filing company. Their technology is protected by 12 patents (and 35 additional pending), and it achieved 37% revenue growth rate last year, boosting profit margins and future revenue for RWS. The thing I really like, is that the founder of RWS, Andrew Brode (holds 43% stake in the company), pays himself a salary of 269 000 GBP (including pensions), which shows he cares more about the future of his business than short term profit chasing. The stock is up 56% this year, I'm a buyer because I believe I'm getting growth at a reasonable price with this one.

Alimera Sciences (ALIM) is a biotech company focused on the development of Iluvien, an eye implant used to treat vision loss associated with chronic diabetic macular edema (DME). The drug was rejected 3 times by FDA already (last time in October), and the company is submitting a new request in early 2014. The difference this time is, that FDA stated that Alimera does not need to conduct additional trials before approval, and the company is undergoing discussions about treatment details to go on the label, if it's approved. The implant is already on the German and UK market, with Austria, Spain, Portugal and France coming soon after receiving  recent approvals. The stock jumped 61% on heavy volume following the news.

US revenues of Iluvien are estimated at 250 mil. USD, if we assume a 30% profit margin and a 20% profit share to pSivida (PSVD), Alimera could generate 60 million USD in net profits from USA alone, which under it's current market cap would bring a forward P/E of 2.2. Assuming a conservative P/E valuation of 10, the market cap would be 600 million, implying a 361% increase from current prices. This doesn't take into account possible future growth or expansion to new markets. There are approximately 3 million people suffering from DME in US and Europe right now.

CytRx Corporation (CYTR) develops cancer drugs, with it's most promising candidate being aldoxorubicin, which treats advanced soft tissue sarcomas (muscle cancer). The company recently announced Phase 2b trials, which demonstrated a clear dominance over the current drug doxorubicin (manufactured by Beohringher Ingelheim and sold by Johnson & Johnson), with median patient progression-free survival of 8.7 months for the former and 4.7 for the latter. As such, their drug would be the first agent to surpass doxorubicin as first-line treatment for sarcomas. In addition, doxorubicin is sold to treat many other types of cancer, aldoxorubicin could be the best alternative on the market, if it's benefits show similar dominance in other fields.

The stock has a market cap of 141 mil. USD, short float stands at 4.36%, and there have been several insider purchases in the past months. If their drug delivers results shown in Phase 2, the stock offers tremendous growth potential for years ahead and is significantly undervalued. There is always a risk of failure, but by purchasing the best 5-6 stocks with huge potential, one can mitigate the risk contribution of a single stock and still capture a large part of upside.

AcelRx Pharmaceuticals (ACRX) and their lead product Zalviso, which addresses problems arising from patient-controlled analgesia (a method allowing the a patient in pain to control his pain relief). Approximately 75% of patients report inadequate pain relief, and are served morphine by IV PCA, which can lead to drug side effects or complications related to it's delivery to patient's body. Zalviso has completed Phase 3 trial and is currently awaiting FDA approval. The company recently announced a partnership with Gruenenthal (European leader in pain medications) under which ACRX receives an upfront payment of 30 million USD and another 220 million USD based on sales, development and regulatory progress. They will also receive royalty payments of 15-25% of Zalviso net sales.

ACRX has a market cap of 430 million, short float of 11% and significant insider buying in the last few moths. Since Zalviso is in a late stage of development and Gruenenthal showed interest in marketing the product, I believe the stock is set for large gains in 2014.

OncoMed Pharmaceuticals (OMED) is a revolutionary pharma company, focused on discovering drugs that target "cancer stem cells", in other words tumor initiating cells. Common therapies usually target the bulk tumor cells, but not the cancer stem cells, which are responsible for the growth and recurrence of tumors. OMED therapies block these cells and also impact bulk tumor cells, so that cancer cannot spread throughout the body. They have several products in their pipeline, the most advanced being currently at Phase 1b/2. Their treatment is significantly different from current chemotherapies, and if successful would change cancer treatment as we know it. 

OncoMed is already cooperating with Bayer and GlaxoSmithKline, but recently signed a deal with Celgene (CELG), to jointly develop and commercialize 6 product candidates including the top one, demcizumab. Celgene will help with development and sales of products, for which OncoMed receives royalty payments: 50/50 in USA and double-digit revenue share in worldwide markets. Celgene will pay 155 million upfront, as well as buy 22 million worth of OMED stock. Most importantly, the deal includes payments for achieving certain regulatory and sales milestones: 790 million for demcizumab and around 440 million for each of the other five programs. If everything goes well, OncoMed will receive 3 billion dollars just from milestone payments! Celgene certainly sees huge potential in their innovative therapies, and will provide much needed capital and resources for development and marketing. Joint ventures in the pharmaceutical sector always smell of opportunity, reminds me of one of the best deals between Pharmacyclics and Johnson & Johnson

OMED sells for 660 million USD, with a 5% short float and no recent insider buying. Following the release of collaboration with Celgene, OMED stock shot up almost 100% with volume higher than on IPO day.

Oramed Pharmaceuticals (ORMP) announced on Friday successful results of the Phase 2 trials of it's insuline capsule (ORMD - 0801), treating diabetes type 1. Patients treated with the drug responded positively, with lower glucose levels correlated to the dosage. The company now moves forward with clinical studies for type 2 diabetes. The stock shot up 48%, 3.6 million shares changed hands (38 000 daily average).

Type 1 diabetes is a disease, which destroys insulin producing cells, and affects around 36 million people, or 10% of the global diabetes population. Type 2 diabetes causes high blood glucose in the context of relative insulin deficiency, and is such less dangerous than type 1 and represents around 90% of all diabetes cases. There are approx. 371 million people with diabetes in the world, with a total cost of 470 billion USD, the treatment is done primarily through injection. Oramed intends to change this with a unique oral capsule, which would help with both disease prevention and treatment.

Oramed is based in Jerusalem, has a market cap of 77 million, short float of 1.5% with 1 insider purchase in the past 6 months. The largest shareholder is the CEO Nadav Kidron with a 10% holding.

Tower Semiconductor (TSEM) signed a joint venture with Panasonic, enabling it to manufacture Panasonic products, using three of Panasonic's manufacturing plants in Japan, as well as a possible expansion of these operations. This would create 400 million USD of additional yearly revenue for TSEM, Panasonic will be obliged to purchase products from the JV for at least 5 years.

Tower Semiconductor is a semiconductor manufacturer and leader in specialty foundry, with plants in Israel, US, and Japan. The company recorded a revenue of 638 mil. USD and a operating loss of 2 million. However, they generated operating cash flow of 70 million in the last year, with a capex of 103 million USD, the deficit being funded by an equity offering in the middle of the year. Their next year EPS is forecasted at 1 USD, giving them a forward P/E 6.5. Accounting for the Panasonic JV, their revenues would exceed 1 billion USD, which would give them a P/S of 0.3 with their current 300 mil. market cap. They currently hold 140 million in cash, and 300 million long-term debt.

I have decided to start watching small caps with huge breakouts, looking for catalysts or fundamental news that could change the downtrend of declining stocks and turn them into multibaggers. The idea is, that breakouts would serve as screening criteria, while I would use additional fundamental analysis to select stocks with highest potential. I will create a small cap portfolio if the picks prove to be successful.  

I have compiled the list of best Indian stocks of 2013. The minimum criterion was a market cap of 1500 Rs. Cr. (250 mil. USD), I also examined if the companies generated a profit or if the stock was bought by insiders.

Ticker             Name                                                      Industry                                  Market cap                 YTD gain    Profit       Insider

The best stock on the list was Kappac Pharma (506938) with a gain of 5000%, while the worst one, Tata Steel (500470) advanced by 110%, which is still great given the SENSEX index returned just 8%. The most represented sector was Biotechnology (4 stocks), followed by Automotive (3), Financial Services (3) and Technology (3). The summary is below:

- All of these stocks made multiple 52-week highs during their advance
- 83% (25) of the stocks are small caps with the market cap below 1 billion USD. The exceptions are Aurobindo Pharma (524804), Reliance Communications (532712), JustDial (535648), JSW Steel (500228), Tata Steel (500470).
- 80% (24) of the companies show a profit
- 53% (16) do not pay any dividend
- 43% (13) have been bought by insider before they made big gains


The best Indian stocks of 2013 have a bit different characteristics than their US counterparts. The majority make a profit and there are also some large cap winners. What they have in common is that most of the top stocks do not pay a dividend and are generally not bought by insiders prior to their advance.  Check out the best Indian stocks to buy now.

NewOcean Energy Holdings is engaged in sale and distribution of liquefied petroleum gas (LPG) and sale of electronic products. The Company operates in three segments: sales and distribution of LPG through Zhuhai terminal and in the international market; sales and distribution of LPG through retail networks in the People's Republic of China and Macau, and sale of electronic products. It's main industrial customers include car manufacturers, chemical plants, aluminium mills or glass factories.

The company has become the largest LPG operator in the South China Region, supplying 24% of LPG for the Guangdong province ( industrial center of China, it represents more than a quarter of the country's exports and houses 100 mil. people). The Company wholly owns a Class 1 LPG sea terminal in Zhuhai, China for VLGCs (Very Large Gas Carriers) through which it conducts the majority of it's business by importing and re-exporting LPG to businesses and households.   The sale to end- users in done through 220 retail outlets, 16 bottling plants, 17 autogas refueling stations. They effectively own the storage, transportation, refueling and bottling of LPG in Guangdong, creating a top-to-bottom distribution network, in other words a vertical monopoly. This is a result of several years of heavy capital expenditures, which will now start to bear fruit. Consequently, many customers require high quality LPG in vast amounts, which only Newocean can supply.

The group is slowly switching it's business to household consumers, which offer a significantly higher margin (13% for car LPG, 35% for bottled) than industrials (6%). As Guangdong is the province with largest LPG consumption, NewOcean estimates that demand for LPG will grow by 8-10% in the coming years, driven by conversions from oil to gas and LPG's use as a chemical feedstock. In addition, the company started a marine bunkering business in Hong Kong (transporting fuel oil to ships) in May 2012, and already generated 940 mil. HKD of revenues (14% of total) in the first 8 months. Teir profit on these operations will increase significantly, as they completed a 70 000 barrel storage facility in Zhuhai just now. Recently, they signed an agreement with China's Sinopec to develop additional autogas refueling stations in Guangdong as well as began selling bottled LPG in Hong Kong for the first time. The company currently spots a ROE of 20%, P/E of 13 and a long-term growth rate of 20%. The days of big capital expenditures seem to be behind them, in 2013 the company restructured some of it's RMB loans to USD and achieved a more efficient operation, translating to: Decrease of inventory turnaround from 24 to 21 days, decrease in AR turnaround from 64 to 40 days and decreased net debt to equity from 33% to 14%. NewOcean Energy is very well positioned to profit from the continued industrial growth and energy demand of the wealthiest region in China. The stock is still undervalued despite it's huge run up and was recently purchased by one insider.

Risks

- The currency fluctuations can have significant impact on their bottom line.
- LPG is a commodity, fluctuations in price could significantly impact their revenues
- The company has placed a secondary offering to finance it's expansion, the number of shares increased by 5% as a result. They could tap the equity markets in the future again, which would temporarily drive the stock price down.

Continuing with my examination of the most profitable stocks of 2013 around the world, find below the UK list:

Ticker             Name                                                 Industry                                    Mkt. cap     YTD gain    Profit      Insider  Breakout

The yearly gains of the best UK stocks range from 137% (MGR) to 585% (ABTX), what is less than half of it's US counterparts. This can be attributed to the significant outperformance of US stocks during the last year, which returned around 25% compared to the 8% return of FTSE100. Nevertheless, there were some big gainers, especially among computer and internet stocks - BLUR, SEE, XAR, BLNX, GBO, WAND, KBC. In fact Blinkx (BLNX) is in my portfolio right now, as I still see a lot of upside potential in that stock. Doing the same research as for US stocks, I have come up with these results:

- All of the best stocks had a market cap of 800 million GBP or lower, before their advance
- Every single stock from the list reached new 52-week highs multiple times during the last year
- 70% (21) paid no dividend during the last year
- 66% (20) still have an institutional ownership of 80% or lower right now
- 56% (17) experienced sharp breakouts on significant volume, which started each uptrend 
- 50% (15) were bought by insiders before the biggest moves began
- 40% of companies were not profitable
- Of the best 5 UK stocks of 2013, only two were profitable, one was bought by insiders and all had broken out of their bases on strong volume before scoring large gains

Comparing these results to the US list, we can conclude so far that: 
1. The best stocks are usually small caps, with market cap under 1 billion USD
2. The majority do not pay dividends
3. Institutional ownership is very low
4. More often than not, these stocks experience sharp breakouts to the upside, which start their advance
5. Top 5 stocks are generally profitable and are not bought by insiders

Again the common trait that all these stocks share is the reaching of new highs many times during their advance. It looks as the UK stocks are less speculative, given that 60% of them earned a profit during the past year compared to only 36% in US. Buying into an uptrend works in UK just like in the US, many of these stocks are still trading at or near their 52-week highs now. I will follow up with similar lists for Hong Kong and Indian stocks to see if the same patterns emerge. Meanwhile, check out the best UK stocks to buy now.

This year is soon behind us, so it's time to take a look at the biggest winners of 2013 until now:

Ticker           Name                                                      Industry                              Mkt. cap    YTD gain      Profit       Insider   Breakout

Gains for the best stocks of 2013 range from 345% (PSIX) to 1162% (AAMC), AAMC being the only stock I owned during the year, although I sold it too early and didn't realize the full gain. The company is the real estate asset management arm of Altisouce Portfolio Solutions (ASPS), from which it was spun off during 2013. The list of industries is quite diverse, although 9 stocks (30%) come from the biotechnology sector (PTCT, LCI, INSY, ACAD, CHTP, GENT, KERX, PBYI, BCRX) and 8 (26%) from broadcasting and communications services (ZHNE, GSAT, GTN, IQNT, MEG, NXST, BCOM, ROAI). I have checked insider buying, breakouts, profits and market cap of all stocks before their advances, and the results are summarized here:

- All stocks had a market cap lower than 1 billion USD before advancing higher
- Each stock has reached 52-week highs many times during it's uptrend
- 86% (26) of them still have an institutional ownership lower than 80% right now
- 86% (26) of all stocks have a short float of 10% or below right now
- 77% (23) did not pay any dividends during the year
- 70% (21)  experienced a major breakout on significant volume, which started their whole move
- 63% (19) have no earnings and are losing businesses
- only 30% (9) have been bought by insiders before exploding higher
- The best 5 stocks of 2013 all had major breakouts, neither was bought by insiders before it, and only one was showing a profit

Buying the best stocks right now on breakouts or after major news can be very profitable. However, I believe that none of these stocks could be discovered by fundamental or technical analysis alone, you need to combine both approaches to dig deeper and analyze their potential. Most of them are not profitable now and won't be for some years, so any valuation might be very imprecise. On the other hand there are many stocks breaking out on strong volume every day, which means some kind of fundamental analysis is required to weed out future losers and capture the multibaggers. I will soon compile similar lists of the best UK, Hong Kong, and Indian stocks of 2013 and compare the results so stay tuned.
Click here to see the best stocks to buy right now.

The best stock screener out there is without doubt on the Bloomberg Terminal, but that's not affordable to many people, so let's look at some cheaper options:

1. Finviz.com

The best and easiest to use screener for US stocks. You can screen more than 6000 stocks based on fundamentals, technical patterns, volume, analyst upgrades, insider buying or earnings announcements. You can find stocks rising or declining on unusual volume pretty fast, with charts and fundamentals in just one click.  This comes in handy especially when you are comparing a large number of stocks based on their chart patterns, volume action or price movement. Finviz offers only a snapshot of fundamentals, so you need to look somewhere else if you need more detailed data.

2. Gurufocus.com

The go-to website for all Guru stock trades, Gurufocus offers screening the trades of famous investors, and also unique criteria like the Piotroski or Altman Z score. The whole site is focused on valuation, so you can screen based on historical P/E, P/S trends or see how companies rank compared to each other in their respective industries based on valuation. The insider buying screen is also good, allowing you to actually find stocks being bought only by CEOs or CFOs. You can view 10-year fundamentals, guru trades or interactive charts on each stock page. The free portion of the website offers USA stocks, you need a subscription for Canada, Europe, Asia and other markets. 

3. Digitallook.com

The most comprehensive screener, when it comes to fundamentals. It's especially useful due the variability of the criteria you can select, which range from share performance, valuation or growth to insider deals and technical indicators. The ranges are not hard coded like on Finviz.com, so you have more options to experiment with. The stock universe includes North America and major European countries like Italy, Germany, UK, Netherlands, Switzerland and others. Stock pages come with 5-year fundamentals, insider deals and basic charts.

4. Screener.in

The #1 stock screener in India. You can actually design your own criteria, what is really great and offers a lot of room to play. You can view charts, 10-year fundamentals, financial summaries and annual reports on each stock page or create and save your own screens and watchlists. The screener features companies from both NSE (National Stock exchange of India) and BSE (Bombay Stock Exchange), totaling more than 7000 stocks.

5. Marketinout.com

Although not as developed and comprehensive as the above mentioned screeners, Marketinout offers a huge universe of stocks, including exchanges in Canada, Mexico, Brazil, Hong Kong, Singapore, Australia or Argentina. The fundamental criteria are rather basic, but the technicals range from EMA crossovers to Ichimoku. The website is quite useful, if you are trading emerging markets stocks.

6. Financial Times screener

Worldwide screener for more than 40 000 stocks. The number of fundamental criteria is very limited, they also don't offer any technicals. Nevertheless, you can screen stock exchanges from every corner of the world and view 5-year fundamentals with an interactive chart on each stock page. Good for finding fundamental inefficiencies among developing markets stocks.

Everyone has heard the old saying: "Buy low, sell high". Many investors and traders have made millions or billions with this approach, including of course the most famous of all, Warren Buffett. But what about buying high, and selling higher? If I show you yearly charts of two stocks, stock A being down 50%, while stock B advancing 50%, most of you will automatically conclude that A is undervalued while B is overvalued. This mindset is completely wrong, but illustrates how many people think about stocks and trading these days. 

Value investing involves buying stocks at prices significantly below their intrinsic value, the difference being the Margin of Safety. Many investors mistake that concept with buying declining stocks and averaging down into them. What's even worse, they look for ridiculously low valuation multiples, strictly avoiding anything higher. This leads them into the worst stocks, automatically missing the best ones. Xerox (XRX) sold at a P/E of 100, before advancing more than 3000%, Google (GOOG) sold at a similar multiple at it's IPO, and we all know how that went. Remember, that many great stocks sell at high multiples initially, and maintain them for many years. If a stock grows it's earnings by 40% per year, the stock price has to advance by 40% for the P/E to stay constant! Consequently, what is a P/E? If I start a new business, am I concerned about the valuation multiple, or the growth of my company in the coming years? Will I not invest all my earnings into R&D, marketing and employee expenses, depressing earnings in the early years to fully profit from the future potential?  

When I buy a stock at it's 52 week or all-time high, I do so because it is undervalued according to my analysis, in other words, the intrinsic value of the company is much greater than the price it's selling for. As Warren Buffett wisely said: "Growth is merely a part of the value equation". That means you can actually find undervalued stocks selling at their 52-week or all-time highs. I remember buying Celgene (CELG) at it's all-time high of 80, buying Apple (AAPL) at it's all-time high of 430, buying BOFI Holding (BOFI) at 28, buying Altisource Portfolio Solutions (ASPS) at 52, Ambarella (AMBA) at 14, SPS Commerce (SPSC) at 25, and the list goes on... What about huge past winners like Netflix (NFLX) or Green Mountain Coffee Roasters (GMCR), which made new highs exactly as the S&P500 bottomed in 2009?  If you stop and think about it, all of the most profitable stocks in history had one thing in common: they kept rising in price, year after year, making new highs everytime on the way to the top. If I check the list of stocks making new highs, I know for sure there are huge future winners in there, I just need to know what traits to look for.

The main advantage of this approach is in cutting losses. When you buy a declining stock, and it keeps down, how do you keep your risk in check, how do you know you won't be stuck 5 years with a stock that isn't moving anywhere? When I purchase a stock at it's 52-week or all-time high, and the price starts to go down, I know for sure something is wrong, either my analysis or just the general market. In that case I get out of the trade and look for other good stocks to buy. If I keep  my losses limited to 10-15% on a bad trade, but take profits after 50-100% and higher gains, then I can strike out pretty frequently and still have a great year. The key to profitable trading is to cut your losses short and let your winners run. If you take profits after 20%, you will never score a home run and your performance will suffer. Benjamin Graham himself stated, that the profits from the GEICO purchase (he put 25% of his portfolio into the stock) were greater than all of his other investments combined.

So does buying the best stocks making new highs work? Absolutely, provided you keep your risk in check and let your winners run, which are the basic tenets of profitable stock trading. Does buying declining stocks work? Yeah it may, but why not wait until they turn back up?

RWS is a provider of intellectual property support services and high level technical, legal and financial translation services, for companies in the pharmaceutical, chemical, aerospace, automotive, defense and telecom sectors. It serves multinationals from Europe, North America, China and Japan. It's clients include 12 of the world's top 20 applicants at the World Intellectual Property Office in 2011 and 14 of the top 20 applicants at the European Patent Office in 2011. The company operates under two divisions, the Translation division (92% of revenues) providing patent and document translation, filing and localization services and the Information division (8% of revenues), which offers a comprehensive patent database service searchable by subscribers, known as PatBase.

RWS has advanced steadily over the years, through both organic and acquisition growth. They have increased revenues and profits for 9th consecutive year, even during the 2008 financial crisis, which saw the number of world patent filings decline, reaching a new high in 2011. The founder Andrew Brode still holds a 43% stake in the company, and pays himself a salary of 269 000 GBP (including pensions), which is a thing I really like, it shows he is shareholder friendly and cares more about the long term future of his business. 

The main catalyst for future growth is their recent acquisition of inovia, a global leader in web-based foreign patent filing. Their technology itself is protected by 12 current patents and 35 pending applications. The company has already served 1500 clients, and grew it's revenues to 26.5 million USD in 2013, a 37% YoY increase. Because of this, RWS Group projects a 12% increase in revenues to 76 million GBP and expansion of margins leading to a 23% increase in pre-tax profits to 20.9 million GBP. Their balance sheet is debt free with 16 million in cash, and 21% ROE, which will increase as well given the inovia profit contribution. In addition to this, WIPO (World intellectual property organization) has announced, that global patent filling growth has reached 9.2% in 2012, fastest increase in 18 years. Their future looks promising, and I think it's one of the best stocks to buy now, I have initiated a position already. For the complete list of best UK stocks, go here.

Market cap: 355 mil. GBP 
P/E: 24
P/S: 4.7
ROE: 21% 

Risks: The greatest risk is a mismatch or human error in their translations, which would void a patent of a client and badly damage their reputation. Although they carry indemnity insurance, the cost of a company's reputation is far greater than any insurance could cover. Another uncertainty is that regulatory approvals and patent requirements might change in the future, which could increase their costs or make them more vulnerable to competition.  

I have decided to sell a small part of my positions in these 2 stocks, as I'm making room for a new purchase. Both companies still possess significant upside, and I will still have a 11% weight in AMS and 9% in HCM after the reduction.

The company manufactures lead acid storage batteries for industrial and automotive applications in India. Their business is divided into two segments: industrial batteries (40% of revenues) and automotive batteries division (60% of revenues). The products are distributed to various users like telecom, railways, power control, uninterruptible power supply (UPS) or to automobile original equipment manufacturers (OEMs) and the replacement market. The company was founded by Ramachandra Naidu Galla in 1985 (who still manages the business today), and established a joint venture for automotive batteries with the global leader Johnson Controls. 

It's main battery brand 'Amaron' is the second largest selling automotive battery brand in India, outsold only by it's close competitor Exide. The two companies hold a dominant market share in India, Amara Raja maintains it's leadership in Telecom (46%) and UPS (32%) markets. The company is quite dependent on the automotive industry in India, which has been experiencing some difficulties lately, as 2013 represents the second consecutive decrease of car sales since 2002. However, the company grew revenues by 26% in the last year, and increased it's return on equity to 30%, from it's 5-year average of 28%. Increasing efficiency has brought their operating profit margins to 16% (from 14.3% in 2011), and their net profit margin to 9.6% from 8.4% in 2011.

Risks
Lead is a major component in the manufacture of batteries, representing over 65% of total costs. A sharp increase in lead prices would decrease company's profits, despite their efforts to source it from cheaper locations. The automotive sector is cyclical in nature, any wide swings in car demand or production would case significant volatility for the stock (although the company grew revenues even during the global crisis in 2008).

Pidilite is a leader in adhesives, construction and paint chemicals, industrial and textile resins and many more consumer and specialty chemicals. Over two thirds of their sales come from products it has pioneered in India The Company operates in three segments: Consumer & Bazaar Products, Industrial Products and Others. Consumer & Bazaar Products consist of mainly adhesives, sealants and construction chemicals. These products are used by carpenters, painters, plumbers, households and represent around 80% of the group sales. Fevicol, the most popular adhesive brand was created in 1959, replacing animal fat used by carpenters for generations. The brand is now a synonym for adhesive in India and has expanded to most Asian countries and achieving the same popularity as in India.

The Indian specialty chemicals market accounts only for 3.3% of the world market, and is expected to grow from 23 bil. USD to 70 bil. in 2021. In the past 5 years, Pidilite Industries has record a sales CAGR of 17%, profits of 21% and spots a 28% return on equity.  I am adding the company to the list of best Indian stocks to buy right now.

The downbeat guidance slashed ULTA's price almost 20% on Friday, I was able to get out at 96.5, having bought near 100 few months ago. The drop provided me with a big lesson for the future, I really like the company but the trend is broken. A big red flag when I purchased the stock was the departure of 2 CFO's within a relatively close period.