That is dedicated to those of you who want to spend money on individual stocks. I would like to share together with you the strategy Personally i have tried over time to select stocks i have realized to be consistently profitable in actual trading. I love to make use of a combination of fundamental and technical analysis for selecting stocks. My experience has shown that successful stock selection involves two steps:
1. Select a stock with all the fundamental analysis presented then
2. Confirm that this stock is definitely 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 choose will likely be profitable. It now offers a transmission to trade Automatic Income Method which has not performed needlessly to say if it’s 50-Day EMA drops below its 100-Day EMA. It is another useful way of selecting stocks for covered call writing, a different type of strategy.
Fundamental Analysis
Fundamental analysis is the study of economic data like earnings, dividends and cash flow, which influence the pricing of securities. I use fundamental analysis to help you select securities for future price appreciation. Over the years Personally i have tried many means of measuring a company’s growth rate so as to predict its stock’s future price performance. I purchased methods like earnings growth and return on equity. I have realized the methods are certainly not always reliable or predictive.
Earning Growth
For instance, corporate net profits are be subject to vague bookkeeping practices like depreciation, cashflow, inventory adjustment and reserves. These are be subject to interpretation by accountants. Today more than ever before, corporations they are under increasing pressure to get over analyst’s earnings estimates which results in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their own balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed developing the site, etc. Many times these write-offs are certainly not reflected as a continue earnings growth but instead make an appearance as a footnote on a financial report. These “one time” write-offs occur with additional frequency than you may expect. Many companies that constitute the Dow Jones Industrial Average have such write-offs.
Return on Equity
Another popular indicator, which I have found isn’t 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 certainly maximizing shareholder value (the higher the ROE better).
Recognise the business is much more successful?
Coca-Cola (KO) with a Return on Equity of 46% or
Merrill Lynch (MER) with a Return on Equity of 18%
The solution is Merrill Lynch by measure. But Coca-Cola features a greater ROE. How are these claims possible?
Return on equity is calculated by dividing a company’s net income by stockholder’s equity. Coca-Cola is so over valued that it is stockholder’s equity is merely add up to about 5% with the total monatary amount with the company. The stockholder equity is so small that almost any amount of net income will develop a favorable ROE.
Merrill Lynch on the other hand, has stockholder’s equity add up to 42% with the monatary amount with the company as well as a greater net income figure to produce a comparable ROE. My point is ROE does not compare apples to apples then is not a good relative indicator in comparing company performance.
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