How I Plan To Uncover 2016's Best Stocks

It's almost time to close the books on 2015, and I have no doubt many investors are frustrated. The market has suffered sickening bouts of volatility with very little to show for it -- the S&P 500 is up just 1.5% year to date.

Of course, there are stocks that have bucked the trend, and today I want to show you how a little-known indicator pegged two of 2015's best-performing stocks.

It's called the Alpha Score, and it combines two of the most powerful drivers of big uptrends. One is technical in nature, and numerous studies have proven stocks with this critical component tend to outperform. The second factor is a fundamental metric that investing greats such as Warren Buffett and Charlie Munger swear by.

Part of the beauty of the Alpha Score is that it takes the emotion out of investing, issuing clear buy and sell signals. And it is not only great at finding little-known companies set to soar, but also at timing entry points in well-known names that are about to make a big run.

To see what I mean, let's take a look at two of our biggest winners this year. Each delivered 50%-plus gains for my Alpha Trader subscribers in just a few months' time.

The first is biotech firm Pharmacyclics, a name that wasn't on your average trader's radar. The firm developed breakthrough treatments to cure life-threatening illnesses.

I recommended it in early February as the stock was emerging from a big base with a textbook bullish breakout. What alerted me to this relatively unknown company, though, was its sky-high Alpha Score of 184 out of a possible 200.

It turned out Pharmacyclics was on the radar of biotech giant AbbVie (NYSE: ABBV ), which acquired the company not long after I recommended it. My readers ended up booking a 55% profit in just over two months.

But as I mentioned, the Alpha Score isn't just about pinpointing under-the-radar stocks set to break out…

Case in point: The Alpha Score signaled a "buy" for online retail giant (Nasdaq: AMZN ) in May.

The company had just issued strong earnings, including a huge increase in cloud services revenue. Following the report, the stock surged to a new all-time high on huge volume, breaking out from a constructive long-term basing structure dating back nearly 18 months.

Many investors are leery of buying stocks at new highs, especially higher-priced stocks like Amazon. But AMZN's outstanding Alpha Score of 169 told me the stock's run wasn't even close to finished.

Lo and behold, Amazon has soared 57% in the six months since then, compared to a less than 2% gain for the S&P 500.

But as you can see in the chart above, there was a hiccup along the way. When the market sold off in late August, many investors dumped their shares and AMZN fell as much as 22%. While those investors panicked, we held strong because the Alpha Trader system did not issue a sell signal.

You see, the quantitative system has two defined exit rules that are meant to protect losses but also keep us from getting shaken out during a normal correction within a larger uptrend. Since the sell rules were not triggered, despite the big drop, we trusted the system and rode out the volatility.

And it's a good thing we did, because Amazon's uptrend quickly resumed and shares went on to make new all-time highs.

The Alpha Score is one of the most powerful indicators I know of. It has pegged many of the best-performing stocks of 2014 and 2015 -- stocks that went on to gain as much as 242%. And we just released the Top 10 Trades for 2016 based on the Alpha Score.

Each of these stocks has an Alpha Score between 166 and 189. With scores that high, these stocks could be some of next year's biggest winners. Click here to find out how to access the Top 10 Trades for 2016.

This article was originally published on How I Plan To Uncover 2016's Best Stocks

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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