Harnessing Innovation to Make a Profit on your Stock Investments (NVIDIA)
Nvidia, also known as NVDA, should be a company name with which every budding investor is familiar. In this article, we’re going to take you on a brief, informative investment journey to demonstrate how you can make a decent profit by investing with NVDA stock.
But first, let’s take a look at what the company does to make money — after all, as of 2017 they boasted a revenue of $9.714 billion. Founded in 1993, NVDA is an American tech company that designs and rolls out visual computing technology to the gaming, auto and professional markets.
The Relationship Between Robotics and Market-Leading Stock
As an innovative market leader whose products are only becoming more relevant and necessary in our diverging tech landscape, their key offerings that cater to current and future of robotics, including graphics cards for cloud computing, mobile gaming and virtual computing. NVDA are also a thought leader in the area of Artificial Intelligence.
Another reason that you’re going to want to know more about NVDA is that its stock has major potential for shrewd investors. We used two key indicators from StockMetrix to backtest their combined signal on NVDA stock. Impressive results gave 34.57% annual returns over a decade-long period: a buy and hold strategy set over the same 10-year period would have yielded annual returns of 28.78%.
Using a Trend-Following Indicator
So, which indicators should you use to hope for similar results? The first is the Aroon Oscillator, a trend-following indicator that measures the strength of current trends and predicts the likelihood that they will continue.
Measurements are typically taken over a 25-day period with the Aroon Up value subtracted from the Aroon Down value and compared on a scale of 0–100 to offer “insight on the relationship between time and a security’s price.” The higher the Oscillator value, the stronger the trend.
Measurements are calculated as follows:
Aroon Up = ((25 — Days Since 25-Day High) / 25) x 100
Aroon Down — ((25 — Days Since 25-Day Low) / 25) x 100
A reading above zero means that Aroon-Up is greater than Aroon-Down, which implies that prices are making new highs more recently than new lows. The strength of the trend can be reasonably assumed from whether it has a positive or negative threshold, although short-lived trends or turbulent trading periods can cause the indicator to move above/below zero frequently.
The Impact of Consumer Spending on Stocks
The second indicator examined macroeconomic trends with consumer spending analysis. This type of analysis covers all private purchases of durable goods, nondurables and services to measure value and identify patterns.
Consumer spending accounts for 70% of all economic activity and the largest portion of Gross Domestic Product (GDP), which means that this indicator represents a valuable determinant of economic performance and key forecast measure of consumer spending when we consider supply and demand production. So long as the demand is there, companies will have a profitable marketplace in which to supply their goods or services, and maintain a healthy profit.
How is Consumer Spending Measured?
Consumer spending is the lifeblood of every business, which provides an effective measure for companies to measure and improve their performance and profits in line with the market conditions. It is measured as the final consumption expenditure in all purchases and covers services including real estate, healthcare, insurance and banking as well as more personal expenditure such as furniture, dishwashers or perishables including groceries and petrol.
The level of consumer spending depends on factors such as disposable income and average annual salary, as well as household debt and consumer expectations. On a nationwide scale, this can lead to inflation or deflation as consumer living standards improve or decline.
Current spending levels should be compared to historic figures, because higher spending is a positive sign of a healthy economy. Growth in consumer spending is likely to result in larger corporate sales and earnings, and, therefore, positively impact stock prices. At the moment, consumer spending is at an all-time high of $12 trillion, which represents a very strong environment in which companies like Nvidia can prosper.
How to Combine Indicators for Best Results
We gave each of our indicators — the Aroon Oscillator and Consumer Spending — equal 50/50 percentage weighting when back testing their combined signal. Our initial investment of $100,000 returned $1.95m over a ten-year period. This is equal to an impressive and solid net gain of $1.85 million or 34.57% annual returns. This included seven transactions with a maximum drawdown set at USD$54.76k.
When we used the same two indicators to backtest stock performance over the previous 12 months (6/27/17–6/27/18), we saw a USD$52.74k net gain (annual return of 52.74%) on our initial $100,000 investment. This involved three transactions over the 12-month period with maximum drawdown set at USD$.4.13k.
Summary
Having read this article, you should now have a clearer understanding of how finding key indicators for a stock may offer accurate signals about a stock’s performance and be indicative of its future movement. Following Aroon oscillator and consumer spending levels may serve as a good indication of Nvidia future stock price movement.
Both of these indicators are readily available in the StockMetrix app. No calculations are required on your part and you can use it free of charge on any USA listed stocks. This makes it super-easy to use for everyone from first-time to old-school investors who are seeking an intelligent way to support their investment activity and make the highest possible returns.
Disclosure:
I have no interest in any stocks mentioned, and no holdings in those companies. This article presents only my opinions. I am not receiving compensation for it. I am not in any way associated with any company mentioned in this article.
