This is committed to those who want to invest in individual stocks. I has shared with you the methods Personally i have tried over the years to choose stocks which i have discovered to get consistently profitable in actual trading. I want to use a mixture of fundamental and technical analysis for picking stocks. My experience has demonstrated that successful stock selection involves two steps:
1. Select a share while using fundamental analysis presented then
2. Confirm how the stock is surely an uptrend as shown by the 50-Day Exponential Moving Average Line (EMA) being higher than the 100-Day EMA
This two-step process raises the odds how the stock you select will be profitable. It even offers an indication to market ETFs which has not performed as expected 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 will be the study of economic data including 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 the 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 have used methods including earnings growth and return on equity. I have discovered the methods aren’t always reliable or predictive.
Earning Growth
For instance, corporate net earnings are subject to vague bookkeeping practices including depreciation, cash flow, inventory adjustment and reserves. These are common subject to interpretation by accountants. Today more than ever, corporations are under increasing pressure to conquer analyst’s earnings estimates which leads to more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their own balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed product development, etc. Many times these write-offs aren’t reflected as a continue earnings growth but rather make an appearance as a footnote on the financial report. These “one time” write-offs occur with increased frequency than you may expect. Many firms that from the Dow Jones Industrial Average have got such write-offs.
Return on Equity
Another popular indicator, which i’ve found is not necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a top return on equity with successful corporate management which is maximizing shareholder value (the larger the ROE better).
Recognise the business is more successful?
Coca-Cola (KO) with a Return on Equity of 46% or
Merrill Lynch (MER) with a Return on Equity of 18%
The answer is Merrill Lynch by measure. But Coca-Cola carries a better ROE. How is that 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 corresponding to about 5% in the total market value in the company. The stockholder equity is indeed small that just about anywhere of post tax profit will make a favorable ROE.
Merrill Lynch however, has stockholder’s equity corresponding to 42% in the market value in the company and requirements a much higher post tax profit figure to create a comparable ROE. My point is that ROE will not compare apples to apples therefore is not a good relative indicator in comparing company performance.
To get more information about ETFs take a look at this useful website: click