Main Menu

How to Select Stocks that will pay.....

First - and this should be foremost on your mind -
Never listen to advice on buying individual stocks.
Make your own decisions!
As you go through this process, remember that Buffett said it is a bumpy ride and it is not for the timid. If your research indicates that the fundamentals are good in the stock you are looking at and the stock is researched well, (no debt and lots of cash on hand), your stock can still drop substantially right after you buy it. Hold to your strategy and have a set point as to when to pull out (either high or low) and use a "stop-loss" option if you are spooked by the ups and downs of the market. Experts say that using a "stop-loss" strategy is not necessarily the best way to optimize growth. If you are squeamish at all, invest in a good S&P 500 mutual fund.
1. Pick up an Investors Business Daily at your local book store.
2. Look for a 90 or better in each of the three columns and consider the A,B,C ratings in front of each stock symbol. These are the best stocks, now go to step 3.
3. Place the best stocks on paper and visit this Link. Copy and paste if you need to - http://bigcharts.marketwatch.com/advchart/frames/frames.asp?symb=msft&time=8&freq=1

This link will give you a technical analysis view of your stock. The S&P500 (gold) line will tell you the overall trend and the (Black) lines will tell you the highs and lows for the day. When the Williams%r is charting at the bottom of the chart, the stock is over sold it is (time to buy) if the fundamentals of the stock are good. When the chart is tracking at the top, it is over bought. (Time to sell)
A. Enter your first stock symbol, hit enter on your keyboard.
B. When your entry pops up look for "Key Statistics" under the "Company" section on the left side of the screen and select it.
4. Scroll down to look at the balance sheet to confirm little or no debt. This is fundamental analysis. Companies that are out of debt are typically stronger, have more cash on hand and are sometimes misunderstood. When a company is misunderstood or simply "out of favor" and its prices have been driven down this could be a good purchase.
5. Visit http://finance.aol.com/usw/portfolios/myportfolios, under "fundamentals tab" in the right corner to see how much debt the company has. Also look at the "Profile" tab under the insider trades link to see what the insiders are doing.

If you don't like AOL - use Morningstar, Yahoo or another tracking/rating stock tool you prefer.
6. Try to get a feel for whether insiders are buying or selling at current prices. If insiders or mutual funds are buying at current prices, it may be time to buy based on further research on the "Bigcharts" website listed below. If they are buying at a few dollars under the current price, not using their employee option price, place the stock on your watch list. Just because an inside employee is buying it doesnn't prove the stock is a good investment. Insiders get caught up in the excitement just like all of us. A system will save your capital and help you avoid mistakes.
7. Eliminate stocks that are not strong according to this research. This process narrows the list down to a few.
8. Now it is time for technical analysis. Log on to www.bigcharts.com (or Yahoo Finance) and click on the blue "quick Chart" icon at the top of the page. (isv example in chart above)
9. Enter your stock symbol and look at the chart.
10. The bottom chart "Williams%R" is an indicator of a stock being oversold or over bought. See image above.
11. You want to "Sell" when a stock is overbought and "Buy" when a stock is oversold. If the line is well above the -50 line it is over bought, if it is well below the -50 line the stock is then considered to be oversold.
12 On the vertical lines in the chart above the Williams%R graph you will see the lines with horizontal dashes in them. If the horizontal line is high on the vertical line the stock it is a downward trend indicator. If the horizontal line is at the bottom it can indicate an upward trend and a possible buy signal. As always, you should consult with your brokerage when considering whether to buy or sell a stock. This formula that works at 28% for me.
Never pay full price for the stocks you buy. - place a "Good till closed" order at your price and sell at your price using this (good till closed) sell order.