Hi, I have begun doing research on the stock market, I am using investopedia.com to do simulations and such. Could anyone give me some advice on what they look at when they are first buying stock and such? Like what makes you pick the stock you do? Does it have to do with the 52 week high/low or is it the price of the share. I know these factors are important i’m just trying to get them straight.
Thanks for all your help
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5 Comments
The list of what to look at is long and the research intensive. I will list the major factors I look at.
1. P/E ratio
2. Forward P/E ratio
3. PEG ratio
4. P/B ratio
5. P/S ratio
6. EV/EBITDA ratio
7. Operating Margin
8. Return on Assets
9. Return on Equity
10. Financial Statements, namely Balance Sheet and Statement of Cash Flows
11. Risks to company’s underlying business
12. Future growth potential
13. Trends in earnings estimates
14. Dividend/ Share repurchase program
15. Insider buying/selling activity
16. Major holders, namely 5%+ owners, and their track record
17. Price relative to 52-week high/low
Now, this may seem simple, however, each of these has sub-categories, which is where the decision is really made, and what seperates a profitable investment from a losing one. Remember that all ratios should be compared to the industry, or even better, the closest competitors, as the numbers alone are not significant. Knowing what to look for in each of the above factors will give you a great edge on outperforming the market. I cannot tell you what to look for in each of these factors, as it would take far too long, however, Investopedia would be a great resource for this. I would suggest with starting with the industries that are bound to outperform over the intermediate-term future, then find the best stock, based on your research, in these industries. Just my strategy, I hope this helps some.
Best of luck!
Brendan Prewitt
I used to pick individual stocks, but then I outgrew it because I don’t have the time or the patience.
Stick with an ETF or Mutual Fund that tracks the S&P 500, NASDAQ, European Markets, Emerging Markets, East Asia, or BRIC Nations.
Easy, quick, effortless, stress-free investing, ahhhh, the good life.
Good luck in your investing adventures!
The previous post is correct, although I would not use mutual funds, unless I thoroughly researched it and looked at its track record closely.
You might also look at DRIP Plans, they are great long-term investments.
As far as picking individual stocks, more risk involved.
Things to look at:
1) P.E. Ratio- this determines how risky it is to buy a certain company. The higher the percent of the P.E. ratio is to the stock, the more risk.
2) 52 week range- helps you understand the company’s range and the high and low. This helps you set you buy and sell prices.
3) When you decide on buying a company, make sure you look at its profile! Make sure that this company is not a piece of junk, if you want to invest a huge amount.
4) Market Indexes. They will usually affect share prices. Ex Dow, Nasdaq, Hangseng…
5) Industry. Don’t pick a crappy industry ex telecom. It will kill your investment. Pick a company in a good industry and you will have less risk. Ex currently gold/silver mining, agriculatural chemicals industries are currently doing well.
6) Commodity prices. All raw material shares will be affected by these prices.
These are some factors I look at when I invest.
If you are too lazy to invest in stocks, play mutual funds. Remember though mutual funds= paying someone to invest for you.
this is a bear market…so buy when the dow is at least 100 pts down..sell when its up..its easier for the dow to go up if its sitting at -100 versus when its at a positive number..then more chances it goes down..just remember those rules and you will be fine…