This really is focused on those which spend money on individual stocks. I wants to share with you the strategy Personally i have tried over time 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 shows that successful stock selection involves two steps:
1. Select a stock while using fundamental analysis presented then
2. Confirm that this stock can be an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being above the 100-Day EMA
This two-step process raises the odds that this stock you select will likely be profitable. It also provides an indication to offer options which includes not performed as you expected if it’s 50-Day EMA drops below its 100-Day EMA. It is another useful way for selecting stocks for covered call writing, a different type of strategy.
Fundamental Analysis
Fundamental analysis may be the study of financial 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 Personally i have tried many methods for 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 these methods are certainly not always reliable or predictive.
Earning Growth
By way of example, corporate net income is susceptible to vague bookkeeping practices including depreciation, cash flow, inventory adjustment and reserves. These are all susceptible to interpretation by accountants. Today more than ever before, corporations they 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 such things as failed mergers or acquisitions, restructuring, unprofitable divisions, failed developing the site, etc. Many times these write-offs are certainly not reflected like a drag on earnings growth but rather show up like a footnote on the financial report. These “one time” write-offs occur with an increase of frequency than you may expect. Many businesses that constitute the Dow Jones Industrial Average have got 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 a high return on equity with successful corporate management that is maximizing shareholder value (the higher the ROE better).
Recognise the business 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 better ROE. How is that this possible?
Return on equity is calculated by dividing a company’s net gain by stockholder’s equity. Coca-Cola is indeed over valued what has stockholder’s equity is merely equal to about 5% with the total rate with the company. The stockholder equity is indeed small that almost anywhere of net gain will make a favorable ROE.
Merrill Lynch alternatively, has stockholder’s equity equal to 42% with the rate with the company and requires a much higher net gain figure to produce a comparable ROE. My point is that ROE won’t compare apples to apples then is very little good relative indicator in comparing company performance.
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