Leading industry groups include most of the best-performing stocks. So a scan of the industry prices list tells you which companies are leading the market. You want to look closely at the top 20% of industry groups. Studies of the greatest stock market winners show the best stocks generally come from the top 22% of industry groups. Also, you want to avoid the bottom 20% of groups. Historical analysis also shows stocks within the top half of all industry groups greatly outperform those in the bottom.

Once you've zeroed-in on a stock, check to make sure at least one other stock in the same industry group is showing leadership as a way of confirming your selection.

You can check the performance of a stock's industry compared to all others with IBD SmartSelect® Corporate Ratings. The Industry Group Relative Strength Rating is displayed with a letter grade:

A — the top 20% of industry groups in terms of performance

B — 20% to 40% of industry groups in terms of performance

C — 41% to 60% of industry groups in terms of performance

D — 61% to 80% of industry groups in terms of performance

E — bottom 20% in terms of performance

The rating is enhanced by "+" and "-" symbols to break downs industry performance into greater detail. The rating is found in IBD's stock tables and the IBD Stock Checkup at investors.com.

(For Sample Purposes Only)

Before finalizing your stock selections, keep in mind your best opportunities are with "A" stocks, though "B" stocks may also prove profitable. In Daily Graphs®, the Industry Group Relative Strength Rating is shown as "Group RS."

Related Resources:

Click here to get the 7 Steps For Selecting Winning Stocks, according to the CAN SLIMTM Investment Research Tool.

Go to the Investor's Corner Archives to read IBD's "editor picks" of classic Investor's Corner columns.

Search our archive of Ask Bill O'Neil Q & A's organized by topic.