This really is dedicated to those of you who wish to purchase individual stocks. I has shared with you the techniques I have used over the years to pick out stocks i are finding to become consistently profitable in actual trading. I want to work with a combination of fundamental and technical analysis for choosing stocks. My experience shows that successful stock selection involves two steps:

1. Select a share with all the fundamental analysis presented then
2. Confirm that this stock can be an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being higher than the 100-Day EMA

This two-step process enhances the odds that this stock you select is going to be profitable. It even offers a signal to trade Chuck Hughes which has not performed not surprisingly if it’s 50-Day EMA drops below its 100-Day EMA. It is another useful way of selecting stocks for covered call writing, yet another kind of strategy.

Fundamental Analysis

Fundamental analysis may be the study of economic data such as earnings, dividends and your money flow, which influence the pricing of securities. I use fundamental analysis to help you select securities for future price appreciation. Over time I have used many options for measuring a company’s growth rate to try to predict its stock’s future price performance. I manipulate methods such as earnings growth and return on equity. I are finding why these methods are not always reliable or predictive.

Earning Growth
For instance, corporate net profits are at the mercy of vague bookkeeping practices such as depreciation, cashflow, inventory adjustment and reserves. These are common at the mercy of interpretation by accountants. Today more than ever, corporations are under increasing pressure to overpower analyst’s earnings estimates which results in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on his or her balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed developing the site, etc. Many times these write-offs are not reflected as a drag on earnings growth but instead appear as a footnote with a financial report. These “one time” write-offs occur with an increase of frequency than you might expect. Many businesses that form the Dow Jones Industrial Average have got such write-offs.

Return on Equity
Another popular indicator, which has been found is just not necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a top return on equity with successful corporate management that is maximizing shareholder value (the larger the ROE better).

Recognise the business is more successful?
Coca-Cola (KO) having a Return on Equity of 46% or
Merrill Lynch (MER) having a Return on Equity of 18%

The answer then is Merrill Lynch by measure. But Coca-Cola features a greater ROE. How is possible?

Return on equity is calculated by dividing a company’s post tax profit by stockholder’s equity. Coca-Cola is indeed over valued that it is stockholder’s equity is only comparable to about 5% of the total rate of the company. The stockholder equity is indeed small that just about any amount of post tax profit will develop a favorable ROE.

Merrill Lynch alternatively, has stockholder’s equity comparable to 42% of the rate of the company and requires a much higher post tax profit figure to produce a comparable ROE. My point is that ROE will not compare apples to apples so therefore is not an good relative indicator in comparing company performance.
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