One thing you should know about me right away is that I'm a quantitative investor. What that really means is that I'm a self-proclaimed numbers geek when it comes to stock market analysis. I believe that the numbers tell you what you need to know. They tell you when to buy and when to sell, and they are 100% unbiased.

As a quantitative investor, one of the measurements I watch closely is called Alpha. What is Alpha? Well, Alpha is simply a measurement of how much of a stock's price performance is due to influences other than the market. In other words, the more independently a stock moves in relation to the market, the higher its alpha and the more likely that stock will outperform the stock market.

I first stumbled across the concept of Alpha almost 30 years ago when I was still a student at Cal State Hayward. I was actually doing research at the time for Wells Fargo that was supposed to prove that markets were random and no one could outperform them for any reason besides good luck. While studying the movements of stock prices I discovered that one group of stocks consistently did better than the stock market. That didn't fit with the theory, so I dug deeper. What I found was that this one group of stocks consistently moved completely independent of overall market movements and earned returns far above the market indexes! It turned out they all had high alphas.

Goodbye Index Investing, Hello High Alpha Stocks

Once I found out that high Alpha stocks could beat the market, I wanted to know what caused high Alpha. And I soon discovered that there were really two reasons for this phenomenon. One group of these stocks had very poor fundamentals and were sold short by large speculators and funds betting the stock would go down. When they bought back their short sales to take profits after the price decline, they created a short-term pop in price. This phenomenon is called a short squeeze, and it's seen all the time in the stock market, particularly after an extended market decline or a particular industry group. This seemed a dangerous way to make money to me. Buying stocks that were in terrible shape hoping for a squeeze just didn't strike me a great way to beat the market.

The other group of stocks, however, showed different characteristics. They were companies with outstanding fundamentals, growing revenues and earnings on a consistent basis. They tended to be innovative companies that were either leaders in their industry or at the forefront of an entirely new one! As Wall Street discovers these stocks, they want to own them–now. The mutual funds, pensions and other large investors begin buying the stock of these companies, pushing them higher. With this amazing discovery, my career path changed on a dime, and I have never looked back.

This Alpha measure of buying pressure makes sure that we are buying not just the right stocks as measured by fundamental variables, but at the right time. Wonderful companies with great fundamentals can be overlooked by large investors and so their share prices can languor for long periods of time. By only buying stocks when they show the influx of large pools of money, I can make sure I don't get a portfolio of good companies with inactive stock prices. I want great companies that are also in very high buyer demand.

This demand can last for years as companies continue to excel and grow sales and earnings. This allows us to own the kind of growth stocks that can go up 100%, 200% and even 500% or more over a few years. Paying careful attention to buying pressure also allows us to sell a stock when the big guys begin to lose interest, or begin to take profits in the stocks. That's when it's time to sell, before the stock's price declines.

Combined with the fundamental ratios that are in vogue with Wall Street right now, buying pressure allows you to find the individual stocks that are ready to rise in price right now. I combine these two approaches to help uncover those great growth companies that are ready to become growth stock stars–from large-cap stocks as I recommend in my Blue Chip Growth service to smaller-cap stocks as I recommend in my Emerging Growth service..

And for you traders who REALLY want to get in on the Alpha action, check out my elite Quantum Growth trading service. We literally trade in and out of high Alpha stocks for double-digit gains in a matter of just weeks.

No matter what your investing style, buying pressure is truly the secret ingredient in the search for growth stock profits. To find high Alpha stocks, look for the Quantitative A-Rated stocks in my FREE stock market analysis tool, PortfolioGrader Pro.