Thanksgiving has come and gone, leaving many of us still feeling full from turkey and side dishes.

In today’s Market 360, let’s take a moment to explore how to select the best stocks. I will explain the practices that have allowed me to secure profits before declines occur. Additionally, I will reveal several overrated stocks that you should consider selling quickly.

To start, let’s discuss recent market trends. Over the past month, I’ve noticed some encouraging movements, as the S&P 500, NASDAQ, and Dow have achieved record highs. This improvement stems from the resolution of uncertainties that plagued the market earlier this year.

We’re also entering the holiday season, a typically strong period for the market, where optimism flourishes on Wall Street. Nevertheless, it’s prudent to remain vigilant and not become complacent.

As we wrap up earnings season, it’s essential to remember what happens during quarterly announcements. Stocks with robust fundamental performance often outperform sales and earnings expectations. This leads to increased institutional buying, which drives their prices up.

Conversely, companies with weaker fundamentals tend to disappoint and can see their stock prices fall significantly after earnings announcements.

Having spent over 40 years in the market, I have learned what works and what doesn’t. I don’t claim to predict the future, but my Stock Grader tool (subscription required) comes very close.

This tool was created to help me differentiate between fundamentally strong stocks and those that are weak, long before the market notices.

Using Stock Grader to Evade Poor Investments

Previously in another Market 360, I detailed how the Stock Grader tool functions, including the eight fundamental criteria that contribute to a stock’s fundamental grade. (You can find that information here for further details.)

Essentially, I focus on key fundamentals: healthy margins, solid sales growth, consistent earnings growth, and positive analyst outlook. These form the foundation of the stocks chosen for my Growth Investor service.

Stock Grader also identifies stocks that generate consistent institutional buying pressure, which relates to my Quantitative Grade.

A stock with a Quantitative Grade of “A” indicates strong interest from institutional investors like banks and money management firms—often referred to as the “smart money.”

These firms possess substantial resources, and when they begin buying, it tends to be significant. Consequently, as buying pressure builds, stock prices rise, leading to profits.

While these principles may seem straightforward, many investors overlook them. This is particularly true for growth stocks that receive more hype than is justified.

While we all desire growth, skyrocketing revenues can mask underlying issues, leading many to invest in the wrong companies.

Fortunately, Stock Grader can also alert us to these problematic stocks. If we already hold them, it can guide us in exiting before it’s too late.

The reality is that even previously appealing companies can hide significant risks within.

A compelling case is Enron’s infamous downfall in the early 2000s.

My Detection of Enron’s Financial Crisis

Once, Enron represented a lucrative growth opportunity.

At its peak, Enron stood as America’s seventh-largest company and was recognized as “America’s Most Innovative Company” by Fortune for six consecutive years.

At one time, it held a strong A-rating in my system. After my recommendation, the stock surged by 36%.

However, as Enron’s rating began to decline, warning signs about its fundamentals became evident, long before Newsweek declared the company’s imminent demise in December 2001. The revelations of corruption remained hidden, but my system signaled caution as the fundamentals no longer supported the rising hype.

Lucky for us, we took our profits, marking one of the best decisions in my career! Many investors, unfortunately, faced severe losses. Enron employees lost their retirement funds while we evaded the ensuing crisis.

Although Enron is an extreme case, it serves as a reminder that it doesn’t take massive fraud to decimate stock values.

During a bubble, even minor setbacks can trigger a significant downturn.

Now, let’s examine some growth stocks flagged by my system for selling or avoiding. Each of these stocks has received a Total Grade of either “D” (Sell) or “F” (Strong Sell).

I emphasize that I am not alleging any wrongdoing at these companies. However, Stock Grader indicates they are currently not good investments. It’s wise to seek better opportunities elsewhere.

Finding Better Investment Opportunities

By combining a stock’s Fundamental Grade with its Quantitative Grade, we can ensure that we aren’t holding onto potential losses in our portfolios.

Ultimately, identifying the right investments is straightforward with Stock Grader. You should buy when a stock receives a Total Grade of “A” (Strong Buy) or “B” (Buy), and sell when it fails to maintain that rating.

This strategy has already led us to substantial success, such as the remarkable 3,000% gain on NVIDIA Corporation (NVDA), which remains in our Growth Investor Buy List.

For those seeking fundamentally sound stocks, my Growth Investor service is an excellent resource. Currently, these stocks demonstrate impressive performance, with an average annual sales growth of 23.7%.