Stock Market Investing Principle 4
How to pick stocks
Totally Free Market Analysis.com will be your free guide to stock picking.
Now, we will not actually tell you which stocks to buy exactly, but will give you good advice on how to pick stocks that suit your needs to align with your portfolio needs.
Plan your stock market analysis attack with a
three step process: G.Q.V
Growth Potential
Quality Company
Value Priced
Growth Potential
This is the place to start when beginning your research for a company or
product to invest in. Normally the basis for growth is the potential
for an increase in sales and revenue. Companies that do well in these
two areas and usually rewarded with higher share prices. Sometimes a
solid history of growth could mean that a company is headed in the right
direction. You can obtain reports about a public company's earnings
every quarter and a proposed EPS, or earnings per share. Another great
place for your research is the web at several different sites:
MSN Money,
Sharebuilder,
Yahoo Finance.
Quality Company
A quality company is one that is built on strong principles and has a
strong drive to become profitable. How a company does against its
competitors will show you well that company is performing and will perform.
If the company sells a product, how well is that product branded and what
market share does it control. Another good way to evaluate that
company is to see if it has generated a strong return for its shareholders
in the past. Look for the leaders of the pack.
Value Priced
The starting point on this part is to look at a company's P/E or
price/earning ratio. The is defined as a comparison of the stock price
to its earnings. Basically it is how much you are paying for a dollar
of a company's earnings. You can take a historical look at past P/E
ratios to determine what the current stock value is based in today's
dollars. You could also compare the P/E ratio of competitor stocks to
see where the one you are looking at stacks up. A good practice is to
look at the earnings per share growth rate to the P/E ratio. If the
P/E ratio is under or near the EPS growth rate, it could possibly signal a
good value to buy.