This can be committed to people who want to purchase individual stocks. I would like to share along with you the ways Personally i have tried in the past to choose stocks i are finding to be consistently profitable in actual trading. I want to work with a combination of fundamental and technical analysis for selecting stocks. My experience has shown that successful stock selection involves two steps:
1. Select a standard while using fundamental analysis presented then
2. Confirm the stock is an uptrend as shown by the 50-Day Exponential Moving Average Line (EMA) being above the 100-Day EMA
This two-step process boosts the odds the stock you end up picking will probably be profitable. It even offers a signal to offer ETFs which has 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, yet another kind of strategy.
Fundamental Analysis
Fundamental analysis is the study of monetary data for example earnings, dividends and cash flow, which influence the pricing of securities. I use fundamental analysis to assist select securities for future price appreciation. Over recent years Personally i have tried many methods for measuring a company’s growth rate so as to predict its stock’s future price performance. I purchased methods for example earnings growth and return on equity. I are finding that these methods aren’t always reliable or predictive.
Earning Growth
For example, corporate net income is at the mercy of vague bookkeeping practices for example depreciation, income, inventory adjustment and reserves. These are all at the mercy of interpretation by accountants. Today more than ever before, corporations are under increasing pressure to conquer 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 things such as failed mergers or acquisitions, restructuring, unprofitable divisions, failed product, etc. Many times these write-offs aren’t reflected as a continue earnings growth but make an appearance as a footnote over a financial report. These “one time” write-offs occur with an increase of frequency than you could possibly expect. Many companies which constitute the Dow Jones Industrial Average took such write-offs.
Return on Equity
One other 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 that is maximizing shareholder value (the larger the ROE the greater).
Recognise the business 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 reply is Merrill Lynch by measure. But Coca-Cola carries a greater 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 so over valued that it is stockholder’s equity is merely corresponding to about 5% of the total market value of the company. The stockholder equity is so small that almost any amount of post tax profit will produce a favorable ROE.
Merrill Lynch alternatively, has stockholder’s equity corresponding to 42% of the market value of the company as well as a much higher post tax profit figure to create a comparable ROE. My point is ROE will not compare apples to apples therefore isn’t a good relative indicator in comparing company performance.
Check out about ETFs go to this popular resource: web link