One of the main problems in chasing a bull market or a bullish trend is the exit strategy. If you exit too soon and when the stock has merely dipped but has yet to reach the end of its bullish phase, you may not benefit from the full potential of the phase. In contrast, if you exit too late, you may lose significant returns you have accumulated so far.
When looking for stocks that are currently adequately or strongly bullish, make sure you have the right exit strategy planned. You may also consider the factors behind the bullish phase, as a big change in those factors may give you more information regarding the exit.
A construction company
Alberta-based North American Construction Group (TSX: NOA) has a long and proud history of commercial-scale construction and development. It started out with road construction in the 1950s, and the company later switched its direction to construction projects for the energy sector. Most of its projects are in the U.S. and Canada, but the company has also recently expanded to Australia.
Its current portfolio of projects includes several mines (oil, coal, metal, diamond, etc.) as well as a major diversion project in the U.S. that is expected to save hundreds of thousands of people from floods and catastrophic climate change.
The stock has been going up steadily since the beginning of the year, and, by now, the stock has gone up by about 83%. Despite this meteoric rise, the valuation of the stock is quite attractive, and the price-to-earnings ratio is just 12.3. There is optimism around its debt management, and the positive financial results are among the factors behind this bullish trend.
A copper producer
Ero Copper (TSX: ERO) is a Vancouver-based mining company that operates primarily in Brazil. The company currently has three operations in Brazil, two of which are in the production stage, and one of them is under construction.
Despite its copper-oriented operations, one of its product-stage projects is primarily a gold mining operation. That project produced about 42,669 ounces of gold last year and is expected to produce about 50,000 this year.
The proven reserves for both the gold and copper markets give the company several years of operating at the same capacity, and it’s expected to grow its copper reserves by a significant margin once its new mine is constructed. The financials of the company are quite healthy as well, and though it carries a lot of debt, it’s a reasonable amount for a mining company.
The stock has been going up steadily for the last 12 months and has almost doubled in value over that period. It has risen by about 50% just this year but also became a bit overvalued.
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Foolish takeaway
It’s difficult to predict how long the current bullish phases will last, but if they keep going up at this pace for a few months or even a couple of years, you might grow your capital to significant proportions if you invest now. But it’s important to remember that it’s just as easy to lower your profit margin or even lose money if you don’t exit at the right time.
