That is focused on individuals who wish to purchase individual stocks. I has shared along the ways Personally i have tried over time to select stocks that we have realized to become consistently profitable in actual trading. I want to make use of a combination of fundamental and technical analysis for selecting stocks. My experience indicates that successful stock selection involves two steps:
1. Select a regular with all the fundamental analysis presented then
2. Confirm that this stock is an uptrend as shown by the 50-Day Exponential Moving Average Line (EMA) being across the 100-Day EMA
This two-step process increases the odds that this stock you choose is going to be profitable. It offers a signal to market stock containing not performed as you expected if it’s 50-Day EMA drops below its 100-Day EMA. It can be another useful way of selecting stocks for covered call writing, a different type of strategy.
Fundamental Analysis
Fundamental analysis may be the study of economic data such as earnings, dividends and 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 strategies to measuring a company’s growth rate so that they can predict its stock’s future price performance. I manipulate methods such as earnings growth and return on equity. I have realized 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 such as depreciation, income, inventory adjustment and reserves. These are at the mercy of interpretation by accountants. Today more than ever before, corporations 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 website, etc. Many times these write-offs aren’t reflected like a drag on earnings growth but arrive like a footnote over a financial report. These “one time” write-offs occur with additional frequency than you could possibly expect. Many businesses that form the Dow Jones Industrial Average have taken such write-offs.
Return on Equity
One other indicator, which i’ve 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 is certainly maximizing shareholder value (the larger the ROE the higher).
Which company is a lot more successful?
Coca-Cola (KO) which has a Return on Equity of 46% or
Merrill Lynch (MER) which has a Return on Equity of 18%
The reply is Merrill Lynch by any measure. But Coca-Cola includes a higher 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 what has stockholder’s equity is just corresponding to about 5% from the total rate from the company. The stockholder equity is indeed small that nearly any amount of post tax profit will produce a favorable ROE.
Merrill Lynch alternatively, has stockholder’s equity corresponding to 42% from the rate from the company and requirements a much higher post tax profit figure to create a comparable ROE. My point is ROE won’t compare apples to apples therefore is not an good relative indicator in comparing company performance.
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