This really is focused on those of you which spend money on individual stocks. I would like to share together with you the ways I have used over the years to pick out stocks that we have realized being consistently profitable in actual trading. I prefer to work with a mix of fundamental and technical analysis for selecting stocks. My experience indicates that successful stock selection involves two steps:


1. Select a stock using the 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 across the 100-Day EMA

This two-step process boosts the odds how the stock you end up picking will be profitable. It even offers a sign to market ETFs that has not performed not surprisingly if it’s 50-Day EMA drops below its 100-Day EMA. It is a useful method for selecting stocks for covered call writing, yet another kind of strategy.

Fundamental Analysis

Fundamental analysis is the study of monetary data including earnings, dividends and cash flow, which influence the pricing of securities. I use fundamental analysis to help you select securities for future price appreciation. Over recent years I have used many means of measuring a company’s growth rate in an attempt to predict its stock’s future price performance. I have used methods including earnings growth and return on equity. I have realized why these methods are not always reliable or predictive.

Earning Growth
For example, corporate net earnings are subject to vague bookkeeping practices including depreciation, earnings, inventory adjustment and reserves. These are subject to interpretation by accountants. Today as part of your, corporations they 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 his or her balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed website, etc. Many times these write-offs are not reflected like a continue earnings growth but rather arrive like a footnote with a financial report. These “one time” write-offs occur with increased frequency than you might expect. Many companies that from the Dow Jones Industrial Average took such write-offs.

Return on Equity
Another 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 is certainly maximizing shareholder value (the better the ROE the better).

Which company is more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%

The answer then is Merrill Lynch by measure. But Coca-Cola includes a greater ROE. How is that this possible?

Return on equity is calculated by dividing a company’s net income by stockholder’s equity. Coca-Cola can be so over valued what has stockholder’s equity is only add up to about 5% with the total market price with the company. The stockholder equity can be so small that nearly any amount of net income will develop a favorable ROE.

Merrill Lynch on the other hand, has stockholder’s equity add up to 42% with the market price with the company and requires a greater net income figure to generate a comparable ROE. My point is always that ROE does not compare apples to apples therefore is not an good relative indicator in comparing company performance.
More details about ETFs see our webpage: look at more info