This really is dedicated to those who wish to spend money on individual stocks. I has shared with you the strategy I have tried personally over the years to pick stocks that we have found being consistently profitable in actual trading. I want to make use of a mix of fundamental and technical analysis for selecting stocks. My experience shows that successful stock selection involves two steps:
1. Select a share using the fundamental analysis presented then
2. Confirm the stock is surely an uptrend as shown by the 50-Day Exponential Moving Average Line (EMA) being above the 100-Day EMA
This two-step process increases the odds the stock you decide on will likely be profitable. It also provides a sign to offer ETFs that has not performed as expected if it’s 50-Day EMA drops below its 100-Day EMA. It is also a useful way of selecting stocks for covered call writing, yet another kind of strategy.
Fundamental Analysis
Fundamental analysis could be the study of monetary data for example earnings, dividends and funds flow, which influence the pricing of securities. I use fundamental analysis to help select securities for future price appreciation. Over time I have tried personally many options for measuring a company’s rate of growth so that they can predict its stock’s future price performance. I have used methods for example earnings growth and return on equity. I have found that these methods aren’t always reliable or predictive.
Earning Growth
By way of example, corporate net income is at the mercy of vague bookkeeping practices for example depreciation, cashflow, inventory adjustment and reserves. These are all at the mercy of interpretation by accountants. Today as part of your, corporations 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 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 aren’t reflected like a drag on earnings growth but alternatively show up like a footnote on a financial report. These “one time” write-offs occur with increased frequency than you could expect. Many firms that from the Dow Jones Industrial Average have got such write-offs.
Return on Equity
One other popular indicator, which has been found isn’t necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates an increased return on equity with successful corporate management that’s maximizing shareholder value (the larger the ROE better).
Which company is a lot 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 carries a better ROE. How is this possible?
Return on equity is calculated by dividing a company’s net gain by stockholder’s equity. Coca-Cola can be so over valued that it is stockholder’s equity is simply add up to about 5% from the total market value from the company. The stockholder equity can be so small that just about anywhere of net gain will produce a favorable ROE.
Merrill Lynch alternatively, has stockholder’s equity add up to 42% from the market value from the company as well as a much higher net gain figure to generate a comparable ROE. My point is ROE doesn’t compare apples to apples then is not a good relative indicator in comparing company performance.
For additional information about ETFs have a look at this useful site: look at this