Volume, price and Cava stock share one thing, says Mike Webster. They all show the value of doing your research before trading.
For Cava, it's about hands-on research. But for metrics like price and volume — which are vulnerable to manipulation — a trader may require an even deeper dive. So said Mike Webster, senior market strategist at IBD, on Investor's Business Daily's "Investing with IBD" podcast.
The Importance Of Research
Volume confirms price action, says Webster. A good measurement of volume can help determine how a stock is trending by gauging the rest of the market, particularly institutions. "If you have a good measurement of volume, what it does is tell you that, hey, this price action is for real," he said.
But Webster says volume has steadily become less reliable through data contamination, especially from institutional investors keen on avoiding attention from traders who watch for stocks seeing spikes in volume.
"The market is starting to figure out they don't want to push a stock up," he said. "They know there are people who look for big volume, so they have smarter ways of doing things."
Webster says his experience with volume emphasized the need for "homework" in considering investments: researching not just stocks, but strategies. "Bill has taught us you need to always be doing original research, always have an open mind," said Webster, referring to IBD founder William O'Neill.
Cava Stock Attracts Foodies And Curious Financiers
Original research can also mean getting out there and trying a company's products to determine whether a stock is worth the investment. Webster points to Cava as a stock with potential — even if their offerings aren't to his taste
"I can't stand their food," Webster said. "When (my partner and I) go to Cava, she goes in and I go to a different restaurant, and then we meet up afterwards."
Webster says the stock's performance, on the other hand, is much more appetizing. "The stock is acting right," he said. "It's at its 50-day, (and) the RS line is above its longer-term moving average."
Cava is a case study in researching stocks and going with the best in the market, Webster says, a principle covered in IBD's investing methodology. IBD recommends picking true market leaders that drive the trends and innovations in their industry.
"People love Cava," said Webster. "Besides my local Cava, the other ones that are a little bit further, they're always crowded, and it seems to be a younger crowd. I like that, because younger crowds, they tend to spend a lot of money out."
Cava occupies a similar niche to Chipotle Mexican Grill in providing a novelty, Webster said.
Audio Version Of Podcast Episode
But paying attention to stocks like Cava is good practice for investors looking further afield than Wall Street for growth. "No matter where I'm at, I'm always looking to see, OK, is that a public company? Let me try it out," said Webster. He says the idea of trying out the products of publicly traded companies is written about in Peter Lynch's book, "One Up On Wall Street."
Cava stock went public in June 2023 and retains a perfect Composite Rating of 99, according to IBD Research. The stock is ranked No. 1 in its Retail-Restaurants Group.
Shares of the restaurant chain are climbing down from highs reached in March but remain above their profit zone. The stock formed a wide cup-and-handle chart pattern that began in August of last year and ended in January. Cava stock is up more than 45% year to date, according to IBD's MarketSurge.
Watch this week's podcast featuring Mike Webster to learn why price matters more than ever.
Follow Mike Juang on X at @mikejuangnews and on Threads at @namedvillage.
