Tips for Analyzing Stocks
If you′re ready to invest in individual stocks, then you need to know how to analyze stocks. Thinking that a company is going to do well is no reason to blindly invest in that company’s stock. Once you′ve decided that you want to invest in a company, you need to take a look at how the company is doing, how it has done in the past, and most importantly, what it is planning to do in the future. You then need to decide if the stock is a good purchase based on the current price. Even if the company is going to grow at 25% a year for the foreseeable future, the stock price won’t be a good purchase if it’s valued like it will grow 50% a year!
The four steps to analyzing a stock are:
- Determine how the company makes its money
- Figure out the company’s finances
- Analyze the future growth of the company
- Determine whether or not the current price is a good one
Actually, before you start analyzing a stock, you have to do is figure out which stock you want to research! Let’s say that I am interested in the (imaginary) company Bill’s Brews (BBREWS) after trying their signature Bill’s Acorn Ale. I go to a finance website, such as Yahoo! Finance or CNN Money, and type their ticker symbol (in this case, BBREWS) into their stock price widget, and start to do research.
The first thing I want to find out is what all the company is all about. Many companies are diversified and do more than you may know. For example, people know that General Electric makes light bulbs, but they may not know that they also make airplane engines and have a powerful finance arm. In this case, BBREWS makes not only beer, but also a wide range of soda pop. In fact, 60% of revenue comes from soda pop, but only 10% of earnings come from soda pop. In other words, 60% of total sales money comes from sales of soda pop, but only 10% of profits. BBREWS makes much more money for every beer it sells than for every bottle of soda. This may make you more likely to invest in BBREWS, because you see that the product you like - the beer - is the one making money.
Secondly, now that you have a relatively qualitative idea of how the company makes money, you need to get a more quantitative idea. You should find out the price/earnings ratio (the ratio of the stock price to the annual earnings of a stock), the price/sales (the ratio of the stock price to the annual sales), the profit ratio of the company, and comparison numbers for other businesses in this industry. You will also want to get any other financial data from this company that you can get your hands on, but these are the most important numbers for proper analysis of a stock. Average values for these numbers will vary tremendously from industry to industry and depending on which stock sectors are hot, so to tell if the number is low or high, you really need to check out related companies in the same industry. For example, you should compare Bill’s Brews numbers to Budweiser, Boston Brewing, and Molson Coors.
Third, you should find out what analysts are thinking about this stock and read their opinions. You should also find out what recent growth rates in profits and sales have been. Check if company insiders or institutional investors, who may have a better idea of how the stock will perform, are buying shares of the stock. If a CEO thinks that the stock of his company is undervalued, he will be more likely to buy it, and if he thinks that it is overvalued, to sell it. Since the CEO probably knows more about the stock than most people, this is a good indicator that it may be undervalued. Analysts also spend long periods of time studying individual firms and finding out if they are overvalued or undervalued. You should also read news reports about the company to see if there are any catalysts for higher than anticipated growth. For example, let’s say that Bill’s Brews just won an award for “Best American Ale” this year. This may lead sales of Bill’s Brews to increase in the coming year.
Finally, now that you have determined all of this, you need to synthesize all of the data to decide whether or not the stock is a good buy. This is definitely more than an art than a science, but you should determine that the numbers you have found make a good investment. One rule of thumb is that the PEG ratio (price/earnings to growth) should be less than 1. In other words, the P/E ratio (found in step 2) should be the same or less than the annual percentage earnings growth rate. For instance, if the P/E ratio is 10 (the stock price is 10 times annual earnings) and the expected growth rate is 15% annually, the stock may be a good buy. If the P/E ratio is 25 and the expected growth rate is 10% annually, it may not be a good buy. However, this is only a rule of thumb and there are many exceptions to the rule.
Now you are ready to analyze stocks on your own. There is nothing like knowing that your investing future is in your hands, and that you will be able to determine when a stock is a good buy and when it isn’t. Good luck finding the right stock investment for you!
Bill Laboon writes economic and stock investment advice at his blog, A Geek Talks About Money
Popularity: 13% [?]
Posted in Online-Stock-Trading, Stock-Analysis | No Comments »
There are stock market sites and blogs that tell you how you can earn from just a small cap investment. Of course, anyone who wants to get rich would understandably jump at the opportunity. But getting rich is not a quick scheme and no get-rich-quick books will tell you that it happens overnight. It does not happen overnight. Even if you think you have the most reliable penny stock listing in the world, it still does not guarantee financial wealth.
Many people get the misconception that millionaires, or at least those who are better off got luck. Luck has only a little to do with it. It’s all hard work. There are even people who life a low profile lifestyle but have fat bank accounts. Then there those who claim that they got rich because they have a dependable penny stock listing and they want you to try it.
Don′t get fooled by this hype. Today there are so many opportunists who would do anything to get a piece of your savings. The penny stock market is one of the attractive avenues for them. If you want to get rich from your penny shares, follow these tips:
- Do not spend beyond your means. Always keep in mind that the general rule of thumb is always to buy shares at low price. When the value appreciates and when the time is right, sell it. But do not use up too much of your savings. Just allocate portion of it. A safe margin would ten percent. And spend only for the list that you personally picked and not from those who suggested it to you.
- Learn and master the basic language, the slangs and the major concepts of the trade. Any penny stock listing is useless if you don′t know how to translate them. And to do that, you have to understand the back and front ends. Along that path you will be encountering so many stock market terms that may be alien to you. Terms like the PE ratio, ticker signs, liquidity, etc. Understand them and learn them by heart.
- Have a realistic commitment of your investment money. Your stock list is supposed to showcase the hot stocks to bid. However, the list can change overnight. What is hot today may not be hot tomorrow and that happens all the time. Always double check on which penny stock you think is most likely to expect profit for you.
- Learn about the trade continually. Your penny stock listing cannot exist alone. It needs partners. Because in this business, the survivors are not the rich, the smart, and the strong. The successful investors are those who keep track of constant changes. These are the stock market trends.
In reality, what makes you rich is not because you have a penny stock listing that guarantees success. What success means is dependent on how much work you are willing to put in your business. The ingredients to success are knowledge, rational analysis, and a roster of facts. If you want to be rich is really all up to you.
Popularity: 80% [?]
Posted in Buying-Stocks, Day-Trading, Managing-Stocks, Penny-Stock, Stock-Analysis, Stock-Investment, Stock-Market-Tips, Value-Investment | No Comments »
Balancing high expectations with the actual stocks being in trade can be quite a challenge for the new penny stock investor. It is no joke to be investing in penny stocks. But if you have the stamina to overcome your first quarter hurdle, you should be good for the next challenge.
In this field, factual data should be coupled with a rational conclusion. Even with the best penny stock pick can’t compete with your decision.
When you get the feel of things, however, penny stock trading can be worth your investment. That is no myth and there are people who can tell you that it’s even fun. So where do you start? Know the basics first. Here are five tips that are most important to get your excited.
- Don’t be hasty in buying shares from ambiguous claims. Of course you wouldn’t buy a product in a grocery store if the label doesn’t say much about its content, would you? There may be phone calls and emails you’ll be getting saying stuff about penny shares that are up for grabs. Verify this claim first. Verify the source of the information too. It is important in your penny stock pick to have track records and an accurate stock price before you buy a penny share. The point is, don’t buy if the information you need is not given completely.
- The PE ratio principle is essential. This is a bit technical for you if you are just a beginner. PE stands for price to earnings ratio. The basic definition is that it’s the value being set by the stock market per dollar per share of a company’s annual earnings. Conduct a thorough research on this to get a better understanding of how it can be applied to your decision making.
- Do not trust hyped penny shares. Although it is true that press releases can pump up the value of a penny stock. But there are scams involved in this part of the trade and hype is often the favorite game. You should be confident enough of your penny stock pick to not get influenced by other stock broker’s opinion. Sure you’ll need these brokerage firms but your analysis is what matters most.
- Seek advice from credible sources. You decided to throw in your investments in your penny stock pick because it is your personal decision to. That means whatever risk you have, loss or gain is all yours for the taking. If someone else gives you an advice, make sure that they have traded their own money and have a good track record of successful transactions.
Nobody in the trading business can tell you how to make decisions. Nobody in the trading business can teach you penny stock wisdom. Nobody and that is a fact. Penny stock brokerage firms can give you advice and present you the hottest penny stock pick there is. Yes, that can be very helpful. But it’s your money out there. Even the stock market doesn’t own it.
Check out the best tips on how to select a penny stock pick. Know more about investing in penny stock from the masters.
Popularity: 30% [?]
Posted in Managing-Stocks, Online-Stock-Trading, Penny-Stock, Stock-Analysis, Stock-Investment, Stock-Market-Tips, Value-Investment | No Comments »
One of the worst things that can happen in the trading business is to go broke. Of course, anyone would do anything to prevent it from happening. If you run out of your investment funds, the stocks and shares just keep moving on and never stop. Of course you won’t be able to operate anymore because you have no money to spare. That couldn’t be difficult to understand, right? So that this horrible vision of bankruptcy will not happen, it is important that you set your limitations in penny stock investing.
Nothing can be more obvious than that. No matter how cheap the stocks are, it is important to keep your reservoir full as well. The stock market trend is not predictable. You share can sell high today and you could lose it tomorrow. What if that loss was the last investment money you have? Sad story but this can happen to anyone who is not setting clear goals for themselves. This article talks about some random guidelines on how to keep your savings intact.
- Spend only within your budget. This is common sense. You can’t spend any more than what you only have. But what this means exactly is that if you are into penny stock investing, don’t pour in all your savings. Set aside a budget for your investment to bank roll. A reasonable margin would be not more than ten percent of your personal funds. Any profit made, you can always add it to your savings. But don’t go above the 10% mark unless you can really afford it.
- Know the loops in penny stock investing. In this same way as setting up a business, you have to understand the dynamics and the operations. This will lead you to better understanding of the trade. With it, you can make decisions with better precision, not accurate but better.
- Know the risks you may encounter. Known to everyone in the trade, penny stock trading ranks the highest in risk scale. The stocks lack liquidity. Fraudulent exercises are very possible in this arena. You could lose your money like bubbles bursting in air. But good investors are natural risk takers. They understand it like it’s at the back of their hands. With this mindset, you can set your investment funds better.
- Learn when to invest and when to hold back. Don’t get carried away if you stock price goes up. It can go down just as fast. So it is important to learn some timing strategies in penny stock investing. This should save you from losing more money and keep your savings steady.
- Do not think of your investment as gambling. If you lose the bet, you can’t have it back. So you bet another. Although stock market trading behaves somewhat similar, it’s not exactly the same. Investment aims for profit. When you get your share, you bank roll it for more profit. And you’re not the only one benefiting it. Gambling is just for entertainment. Penny stock investing is for serious money makers.
The list can simply go on. But no matter how sensible and persuasive these tips are, it’s really up to you. It’s your penny stock investing money. You have full authority over it. Small cap trading can make you smile a lot if you stop betting your money and start thinking of it as investment.
Popularity: 41% [?]
Posted in Buying-Stocks, Managing-Stocks, Penny-Stock, Selling-Stock, Stock-Analysis, Stock-Portfolio, Value-Investment | No Comments »
It may not be the NBA Finals, but as Dallas Mavericks billionaire owner Mark Cuban once quipped, “If you don’t follow the stock market, you are missing some amazing drama.”
As the stock market continues to reach record highs this year, a majority of Americans feel confident about their portfolios and their equity investments. According to a March poll by business channel CNBC, 60 percent of Americans feel confident that their stocks will trade higher this year, even after the survey was completed during a downturn in the market.
The market has seen an extraordinary run since last summer, going from the 10,000s to the high-13,000. Americans are becoming more secure with their financial aptitude nowadays, and realize that regular stock investing over time can result in tremendous returns.
The stock market isn’t without its defects, but a practical, easy-to-understand advice follows the logic that stocks have historically outperformed all other investments, averaging a 10 percent gain in the S&P 500 since 1926.
It’s no real secret that a diversified portfolio over the long run is part of a smart financial strategy. But there are rules to investing, and I believe the new book “How Come That Idiot’s Rich and I’m Not.” offers up some common-sense solutions for everyone who wants to invest in stocks and mutual funds.
Trying to outwit the experts is fruitless. People [who go to Vegas] always tell you about the time they went and won, but they never tell them about the other eight trips where they lost. If you′re a hobbyist picking stocks part time thinking you′re going to outsmart Wall Street, you′re out of your mind.
Robert Shemin, JD, MBA, and Wall Street Journal bestseller, who was once considered the “least likely to succeed,” is a multi-millionaire who speaks to hundreds of thousands yearly, regularly sharing the podium with such financial luminaries as Donald Trump, Robert Kiyosaki, David Bach, Suze Orman and Tony Robbins. Shemin has worked with high-net-worth individuals for Goldman Sachs, helped create four companies, and been involved in over l,000 real-estate transactions. Find out more about Robert at http://www.claimmybonus.com
Popularity: 63% [?]
Posted in Bull-Market, Buying-Stocks, Make-Money-Online, Managing-Stocks, Online-Stock-Trading, Share-Trader, Stock-Analysis, Stock-Market-Astrology, Stock-Market-Investment-Guide, Value-Investment | No Comments »
January 31st, 2008 by admin
Grow your Money from stock market thrills by Hot Tips
When an investor decides to invest in stock market a common question arises in which stock he should invest. The share, stand at low risk and high potential is always good investment decision. But now the thing come out what these are techniques to find such stock from stock market thrills. The proper research and following tips may help lots to find such stock.
There are following steps to select winning stock
Steѡ: Create a Raw list of these stocks
- Stocks can be preferred from the list presenting 52-week lows. Their argument will be that in order to be successful one should buy low and sell high. The stock one selects from this list may be overlooked by the market in its chase after other “hot” deals. Or its low price may be due to some regulatory squeeze that is predicted to end in the near future. It may justify this choice by the argument that a company that is at bottom is more likely to lift up than a company that is already at the top. The latter’s potential for growth is less likely.
On the other hand investor can select a stock that is part of the 52-week highs only when it is justifiable by its growth potential and right execution of its activities. Since the market has moved the stock so up, it is fond of its way of doing things. Therefore, the stock is likely to continue to move up.
- A winning stock may choose from a list of low P/E (Market price/Earning per share). The P/E ratio is a calculation that evaluates a stocks relative performance and value. It is computed by dividing the stock’s price by the company’s per share earnings for the most recent four quarters.
An investor may choose the stock from high P/E list as justification good company’s growth outlook, the industry in which the company is engaged, the company’s accounting policies, and whether the company is a start-up firm or a more established business but being an investor he should confirm about that there is no role of speculation in selective stock.
Stock Example: P/E – Stock price compared to the “company earnings” per share (EPS) reported in ratio (i.e., profit divided by the number of shares outstanding).
Low P/E – a better return on investment.
Stock A Stock B *
Price $10.00 $20.00
Earnings per share $2.00 and $2.00
P/E Ratio 5 and 1
Stock B is more expensive than Stock A in terms of earnings. For Stock B, you must pay $20.00 to earn $2.00 but for Stock A, you pay only $10.00 to earn $2.00.
Here P/E is comparable with its pear. Stock A and Stock B is the same pear group than stock A will take place in our creating list as finding low buying and relatively low risk because the price of share is already low and low speculation.
Step2: Refining the created list
Now refine this list by preferred those stocks which are belong to good and booming sector in current scenario. When stocks are classified by type of its business and put companies in similar industries together for comparison purposes. Most analysts and financial media call these groupings “sectors” and you often read or hear about how certain sector stocks are doing.
When you are creating your portfolio the diversification becomes a good tool for risk minimization hence being an investor you should pick stocks from at least two or three different sectors.
Step3: Fundamental analysis
- Fundamentals of company are highly crucial in stock selection. Fundamental analysis is the process of looking at a business at the basic or fundamental financial level. This type of analysis is based on the fundamental facts about a company: profits, sales, earnings, dividends, assets, products, competition, loans and growth potential. It attempts to determine whether the company is financially sound and will continue to earn money .A good player of numbers and ratios is proved as a good fundamental analyst. The ratios analysis, client structure, managerial efficiency analysis and sales forecasting are basic tools of fundamental analysis .The best way of ratios analysis is that, the company ratios should be comparing by its pears and industry. For proper fundamental analysis one should be assign weight for particular factors like profitability, leverage, capital structure and management efficiency etc according to its business. Lets take an example if one is analyzing the banking sector than more focus on its capital structure, cash flow analysis; off balance sheet items and its management efficiency similarly if it is being performed for a manufacturing company the crucial factors are client structure, liquidity and cost management. Suppose a company’s sales revenue is depended only one or two clients or customers owing to defaults any one of them the profitability of company will go down sharply it shows high business risk therefore these qualitative factors should be keenly consider at time of analysis.
Beside these one can’t be ignore the capital market ratios in which P/E ratio and MV/BV (market price/book value) are highly considerable the P/E ratio we have already described, the Price to Book ratio or MV/BV is a measurement that looks at the value the market places on the book value of the company the book value per share of company is nothing it is the net total asset value per share in company’s books of account .Like the P/E, the lower the MV/BV, the better the value. Value investors would use a low MV/BV is stock screens, for instance, to identify potential candidates.
SteѤ: Dividend Payout analysis
- A dividend indicates the annual payment per share of a stock designated by the company for stockholders. Common shares dividends vary with the business condition of the company and are evaluated regularly by a firm’s directors. If company ‘A’ announces 100% dividend it means company declare $1 with face value per share $1 that means dividend always declare at face value but not at market value therefore on account of an investor is buying stock at market price not at face value hence the real dividend yield for an investor will be differed. In this case if the current stock price of company A is $20 per share hence the dividend yield will be only 5% not 100%. Apart from that an investor should analyze dividend payout ratio, the ratio between dividend per share and earning per share (DPS/EPS). A payout ratio to some extent reflects company’s financial health and management efficiency. If a company is not paying dividend even very good EPS it may company have good investment opportunity in it hand or planning to repay its borrowing. A payout ratio of 75% or less means that company is mature and no unforeseen events in company operation therefore dividend is probably safe. If the payout ratio is greater than 100% that is red flag. It could mean that the company is paying the dividend by selling its assets or by borrowing money. It is important to note that a dividend payment is entirely at the company’s discretion. If the company runs into financial troubles, you could be hit with a double whammy. The dividend could be cut or even eliminated and the stock price is in danger of declining.
Speculation: One can also make ones money triple or four times by speculation to speculate means to take a risk. Speculation is usually referred to as short-term profit rather than long-term investment. There is thousand of stock those do not provident income, nor do they have growth records. When such stock is purchased, a change is taken that the company will become successful and the stock price will go up. For example, suppose that you had purchased stock in a bicycle company just before bicycles because popular you might now be rich because you purchased stock at a time of low demand. So, speculation means prediction. If you are not good at predicting outcomes, there is a change that one will lose some money with speculative stocks but it doesn’t mean that the speculative stocks only those which are not having sound fundaments. There is high risk attached with these stocks as speculation based on expectation only without any genuine information, but so are the rewards. Therefore for discovering these stocks one should create a list from 52 weak low or 52 weak high and focus on those stock which are inflating by 10-15% in only one trading day and daily trading volume, these pieces of information can collect easily from exchanges & stockbroker’s website. One can read the charts it become too easy to discover these stocks. But for a novice it is better to keep distance from speculative stock as seeing high risk in these shares.
The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory - a “best guess” of how to invest. And sometimes two seemingly opposed theories can be successful at the same time. Perhaps just as important as considering theory, is determining how well an investment strategy fits your personal outlook, time frame, risk tolerance and the amount of time an investor want to devote to investing and picking stocks.
Popularity: 18% [?]
Posted in Online-Stock-Trading, Stock-Analysis, Stock-Market-Strategy, Stock-Market-Tips | No Comments »
January 12th, 2008 by admin
Stock analysis is a tedious job but understand how to analyze them can prevent you from losing money in stock market. These two methods will do exactly that.
Fundamental Stock Analysis
Fundamental analysis used to discover stock’s fundamental values. How the business is doing, how competitive are they and what is going to happen in the future are some of the questions need to be answered. The objective is to reveal stock’s profitability and management efficiency.
How do you know if the stock is profitable?
How do you know if the board of management is efficient?
You will find answers to both questions in annual reports.
Balance sheet, income statement and cash flow statement is the most critical part in any corporate annual reports. Mathematical formulas or known as key financial ratios will help you to identify if the stock is worth investing. Besides, these financial ratios can be used to value stocks as well.
Once you know value of the stocks, you can make money by buying undervalued stocks and sell them if the stocks are overvalued. This approach also known as value investing, made popular by Warren Buffet and his Gurus.
Technical Stock Analysis
Technical analysis, on the other hand, focus on market sentiment. The idea is to study market behaviour and take advantage from other investor’s greed and fear. Seasoned technical analyst can tell you how the market is doing now and what the stock price will be tomorrow.
They make money out of human’s emotion.
But how they did that?
The secret lies in the stock price.
Expert stock traders use several of technical indicators to understand market behaviour; Relative Price Index (RSI), Moving Average Convergence Divergence (MACD) and Average Directional Index (ADX) to name few. They also use trading chart to visualize the price patterns such as Japanese Candlestick.
Either you are prefer swing trading, trend trading or momentum trading, combining fundamental analysis with your trading style will only make you rich faster.
Find out more information on fundamental analysis and technical analysis at http://www.Stock-Investment-Made-Easy.com/
Chart Profits The Easy Way with A Step-by-Step Guide to Stock Investing for Beginners
Popularity: 13% [?]
Posted in Stock-Analysis, Stock-Investment | No Comments »