What is a High Flier?
A high flier is stock that has risen very quickly.
How Does a High Flier Work?
Let's say Company XYZ rises 45% in five days -- well ahead of the market's rise of 10% over that time. The stock volume is exceptionally high -- many investors are interested in buying or selling the stock, and investors are likely buying on expectations of what the company will earn rather than what it has earned. The stock is a high flier, and it is probably overvalued right now.
Why Does a High Flier Matter?
High fliers are the equivalent of one-hit wonders in the music world or reality TV stars -- they come and go very quickly. Tech stocks were famous high fliers in the late 1990s (before the tech bubble burst).
High fliers are very volatile, and they spike and fall quickly. The idea is that investors have to detect and capitalize on a high flier before it falls back to earth. They also have to determine whether a stock is trading based on overly aggressive forward-earnings estimates that have little chance of materializing.
