Momentum Investing: When High Prices Are Not a Warning Sign

Investors often shy away from buying stocks that have already risen substantially, but this approach can lead to missed opportunities. David Gardner's track record suggests that a stock's all-time high may not be a warning sign, but rather evidence of its underlying strength.

Gardner's most successful picks, including Amazon, Apple, and Netflix, had already climbed dramatically before he initiated his positions. Despite their previous gains, these stocks continued to rise after Gardner invested in them.

The key to Gardner's success lies in his understanding of momentum investing. He recognizes that a stock's price movement can be a confirmation of its underlying investment thesis, rather than a contradiction. When a company has demonstrated strong relative strength and continues to participate in its expansion, it may be a sign that investors are increasingly willing to pay higher prices for businesses with compelling growth prospects.

Gardner's record is not about buying low or waiting for stocks to become cheap after their initial advances. Rather, it's about recognizing the underlying forces driving a company's growth and participating in its expansion. By distinguishing sustainable momentum from speculative enthusiasm, disciplined investors can turn an intimidating all-time high into the beginning of a much larger opportunity.