That is focused on individuals who want to spend money on individual stocks. I would like to share with you the strategy I have used in the past to pick stocks which i are finding to get consistently profitable in actual trading. I prefer to work with a mixture of fundamental and technical analysis for picking stocks. My experience shows that successful stock selection involves two steps:
1. Select a standard while using the fundamental analysis presented then
2. Confirm the 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 increases the odds the stock you end up picking is going to be profitable. It now offers a transmission to sell options which includes not performed needlessly to say if it’s 50-Day EMA drops below its 100-Day EMA. It can be another useful method for selecting stocks for covered call writing, quantity strategy.
Fundamental Analysis
Fundamental analysis may be the study of economic data such as earnings, dividends and funds flow, which influence the pricing of securities. I use fundamental analysis to aid select securities for future price appreciation. Over many years I have used many means of measuring a company’s rate of growth so that they can predict its stock’s future price performance. I used methods such as earnings growth and return on equity. I are finding why these methods usually are not always reliable or predictive.
Earning Growth
As an example, corporate net income is susceptible to vague bookkeeping practices such as depreciation, earnings, inventory adjustment and reserves. These are common susceptible to interpretation by accountants. Today more than ever, corporations they are under increasing pressure to get over 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 things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed product development, etc. Many times these write-offs usually are not reflected like a drag on earnings growth but rather appear like a footnote on 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 got such write-offs.
Return on Equity
Another popular indicator, which has been found isn’t necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a higher return on equity with successful corporate management which is maximizing shareholder value (the larger the ROE the better).
Which company is a bit 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 has a higher ROE. How is possible?
Return on equity is calculated by dividing a company’s net profit by stockholder’s equity. Coca-Cola is indeed over valued what has stockholder’s equity is only add up to about 5% in the total market price in the company. The stockholder equity is indeed small that nearly anywhere of net profit will develop a favorable ROE.
Merrill Lynch alternatively, has stockholder’s equity add up to 42% in the market price in the company and needs a much higher net profit figure to make a comparable ROE. My point is that ROE will not compare apples to apples then is not an good relative indicator in comparing company performance.
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