This really is committed to people which spend money on individual stocks. I wants to share along with you the methods Personally i have tried through the years to pick out stocks that I are finding to be consistently profitable in actual trading. I like to use a mixture of fundamental and technical analysis for selecting stocks. My experience has demonstrated that successful stock selection involves two steps:
1. Select a standard while using the fundamental analysis presented then
2. Confirm that the stock is definitely an uptrend as indicated 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 decide on will be profitable. It also provides a sign to market Chuck Hughes containing not performed needlessly to say if it’s 50-Day EMA drops below its 100-Day EMA. It is a useful means for selecting stocks for covered call writing, a different sort of strategy.
Fundamental Analysis
Fundamental analysis could be the study of financial data such as earnings, dividends and your 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 methods for measuring a company’s rate of growth so that they can predict its stock’s future price performance. I purchased methods such as earnings growth and return on equity. I are finding the methods are certainly not always reliable or predictive.
Earning Growth
As an example, corporate net profits are be subject to vague bookkeeping practices such as depreciation, earnings, inventory adjustment and reserves. These are be subject to interpretation by accountants. Today more than ever before, corporations are under increasing pressure to get over analyst’s earnings estimates which leads to 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 developing the site, etc. Many times these write-offs are certainly not reflected like a continue earnings growth but rather show up like a footnote over a financial report. These “one time” write-offs occur with more frequency than you could expect. Many businesses that form the Dow Jones Industrial Average have such write-offs.
Return on Equity
One other indicator, which I have found just isn’t 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 greater the ROE the better).
Recognise the business is much more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%
The reply is Merrill Lynch by any measure. But Coca-Cola has a higher ROE. How is this 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 its stockholder’s equity is just equal to about 5% of the total market value of the company. The stockholder equity is indeed small that just about any amount of post tax profit will create a favorable ROE.
Merrill Lynch alternatively, has stockholder’s equity equal to 42% of the market value of the company and needs a greater post tax profit figure to create a comparable ROE. My point is that ROE does not compare apples to apples so therefore isn’t a good relative indicator in comparing company performance.
To get more information about Chuck Hughes see this popular site: look at here