PONDERING ON WHAT STOCKS TO BUY?
One of the biggest and common natural trend for starter investors is to ask for the perfect stocks to buy at a particular time.
Well, to be honest, I don’t know.
And I think no one knows!
Surely you would see scattered recommendations and hot tips around (sometimes contradicting) from almost anyone who claims to have the experience and expertise to make such predictions, but those are all presumptions to some extent.
Because the stock market, while may have some trends, is still unpredictable. If it were not, many would have been millionaires in days.
So a more secure way for your investing is to go back to the core of the matter, examining closely what stocks you’re going to buy (or avoid!).
And since you’re looking for additional money, then why not search for the companies with the actual MONEY?!
Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested. – Peter Lynch
Let’s dig this MONEY deeper!
Investing is all about potential. Knowing the management of the company is an essential part in your analysis as it sets the direction of the course of its life, and a great management is a crucial component to fully achieve that sleeping potential. The heat of competition also calls for great plans, whose entire cycle, from its formulation, implementation up to evaluation, rests on the brains of its management.
Earnings is the lifeblood of all companies. Without visible earnings, there’s not a chance for any company to survive in a very competitive environment. No earnings should serve as a red flag for you not to touch it, even with a long slender rod. But also note that earnings declaration is not enough. Also assess if their reported earnings meet their pre-set targets, at the least. It’s an evaluation if they’re being true to their projections!
ICE BALANCE SHEET
Balance sheet is the anatomy of a company. And any anatomy tells whether the company’s health is improving, or is suffering from cardiac arrest. You just wouldn’t want to own a company that’s dying, or is losing stamina. Companies who are proud of their balance sheet disclose them to the public. If you can’t find it for a specific company, forget that company! Move on and find a stronger and healthier one.
Always be in-the-know of the industries emerging at any particular time. Depending on the prevailing national economic conditions, different times call for different needs, favoring specific industries over another.
For instance, when people tighten their belts under economic crisis, utilities industry, serving the basic and always-there needs of everyone, deserve your closer attention. Real estate developers on the other hand suffer when not so many people can afford to buy high-cost houses or condo units.
Once you know what the leading industries are, you automatically reduce your screening to those companies belonging to that market industry expected to perform well.
UMMY OFFERINGS – the need for superior products and services.
Ultimately, this will speak for the company. Superior services and products maintains customer’s loyalty. This also enables them to attract more and more customer enlarging their share of the market. What does that mean? – Increased earnings!
Finding the news that your stocks gained the appraisal of a regarded consumer group can be a good sign for you. Constant consumer complaints and rumors of dissatisfaction can spill to you the worse to come.
Peter Lynch often said he found some of his best-performing investments while visiting the mall with his family. He noted that, “If you like the store, chances are you’ll love the stock.”
There you have it.
Make no mistake. Obviously this doesn’t mean that you look for a company with all the above highlights before you click that buy order. That would be very safe, but also very restricting. Use them more as your guide, at least you would easily know what stocks to ignore.
Find a company with the MONEY. They certainly have the future.
Have fun investing!
PS1: Well, this just struck me. I had this gnawing feeling that I might be encouraging you to enter a world that’s totally insensible to you. Don’t play the game without knowing its rules. Know how the stock market really really works!
PS2: These guidelines can be quite demanding. Especially for beginners, you wonder how and where to get these tons of info. Unless you’re really into it, chances are you don’t have enough time to even dwell more in any of the above-mentioned criteria. That’s the challenge, and you’ll be get used to it through time. Short-cut your analysis! Join the Truly Rich Club.