This really is specialized in those of you which invest in individual stocks. I want to share with you the methods Personally i have tried in the past to select stocks that I have discovered to be consistently profitable in actual trading. I want to use a mixture of fundamental and technical analysis for picking stocks. My experience has demonstrated that successful stock selection involves two steps:
1. Select a share while using the fundamental analysis presented then
2. Confirm that the stock can be an uptrend as shown by the 50-Day Exponential Moving Average Line (EMA) being over the 100-Day EMA
This two-step process raises the odds that the stock you end up picking will likely be profitable. It offers a signal to trade Chuck Hughes containing not performed as you expected if it’s 50-Day EMA drops below its 100-Day EMA. It is also a useful method for selecting stocks for covered call writing, yet another kind of strategy.
Fundamental Analysis
Fundamental analysis could be the study of financial data like earnings, dividends and money flow, which influence the pricing of securities. I use fundamental analysis to help select securities for future price appreciation. Over many years Personally i have tried many means of measuring a company’s rate of growth in an attempt to predict its stock’s future price performance. I used methods like earnings growth and return on equity. I have discovered that these methods are certainly not always reliable or predictive.
Earning Growth
For example, corporate net income is be subject to vague bookkeeping practices like depreciation, income, inventory adjustment and reserves. These are typical be subject to interpretation by accountants. Today as part of your, corporations are under increasing pressure to beat analyst’s earnings estimates which ends up in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on his or her balance sheet for such things as failed mergers or acquisitions, restructuring, unprofitable divisions, failed product, etc. Many times these write-offs are certainly not reflected like a continue earnings growth but instead arrive like a footnote over a financial report. These “one time” write-offs occur with more frequency than you could expect. Many companies which make up the Dow Jones Industrial Average have such write-offs.
Return on Equity
Another popular indicator, which I have found is just not necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a high return on equity with successful corporate management that is maximizing shareholder value (the higher the ROE the higher).
Recognise the business is a lot more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%
The answer then is Merrill Lynch by measure. But Coca-Cola carries a much higher ROE. How is possible?
Return on equity is calculated by dividing a company’s net gain by stockholder’s equity. Coca-Cola is really over valued that it is stockholder’s equity is simply equal to about 5% of the total monatary amount of the company. The stockholder equity is really small that just about anywhere of net gain will create a favorable ROE.
Merrill Lynch however, has stockholder’s equity equal to 42% of the monatary amount of the company and requires a greater net gain figure to produce a comparable ROE. My point is ROE will not compare apples to apples so therefore is not an good relative indicator in comparing company performance.
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