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Last Tips & Tricks

Increase the profitability of your stock picks

Stock investing tips by Mike Langevin

 

Buy shares cheap, keep them for a while then sell them for a good price, This is a very simple strategy, but investing in the stock market is much more than buying stocks, and waiting for their price to go up. You have to select the best according to the strength of the market, financial ratios, the fundamental of the company, the business model and so on and so on. Investing requires a great deal of work and you need to keep emotions out of the equation.
The first step for selecting stocks is to define a battery of investment criteria, then to sort potential candidates that will adhere to all the criteria. Today I will explain the 5 major investment criteria that I use every day to select the best possible stock picks. Each individual criteria when applied individually will help you make a selection, however when you apply all five together, this creates a significant advantage for the investor.

 

 

 

1. Look beyond the flavour of the day

There is a saying that is often used in the market that says you can make a lot of money in the stock market by buying stocks that are not the flavor of the day. The saying also applies to the general market or a particular sector. There is no reason to rush out and buy stocks simply because they are cheap, however it is always beneficial to check the stocks and sectors to understand the reasons for the decline, was it influenced by emotion or fact? If emotions were the culprit that pushed the stock lower then we could possibly have a bargain on our hands

 

2. Pay attention to insider activity

When management demonstrate their optimism by putting their own money in their company, well it’s time to pay attention. Insiders can sell for several reasons, but when they buy they have only one … to make money. I have made so many trades based on this method that if you ask me” Can an average Joe benefit as well as an insider ” I can honestly say YES !

 

 3. Look for quality and growth potential.

It is important to keep in mind that even if we use past data as an indication of what could happen soon, it is what will happen in the coming months and years ahead that is the most important. Businesses are not immune to economic cycles or a bad quarter so when searching for a potential candidate it is essential to focus on companies that add value over time. If after your purchase the stock and it continues to decline, you have the option of being patient and hold your position for a longer period. With the conviction of possessing shares of a solid company that will create value over time, you are ready to face the market head on and wait it out. Having done your homework to select the right stock, you have put all the advantages on your side to come out a winner.

 

4. Paying the right price

The difference between a good company and a good investment is the price you pay. There are thousands of companies, but they are not always valued at an attractive price. Finding a good company is key, to buy it at a good price is as important and essential to be successful with your stock investments.

 

5. Consider companies with buyback programs

When a company has a large amount of free cash, it must decide how best to use it to benefit its shareholders. One way to do this is that the company may decide to repurchase its own shares. In doing so the company demonstrates a high degree of confidence in the value of its shares and in its future growth. The buyback reduces the number of outstanding shares on the market thereby increasing the value of the remaining ones. This is simple math as you split the profits with a smaller number of shares therefore we get a higher earnings growth per share and this is what ultimately drives the stock price up.Many studies have proved that a share buyback program is followed by an increase in stock price. This event should then be considered when it comes time to choose a stock.

To conclude, it may seem like a lot of work but it is a necessity if you want to try and pick winning stocks. Of course the story does not end when you press the enter key for the purchase, you must now monitor your stocks to determine the best point of sale. I use these 5 criteria every day to pick my stocks as they have proven themselves time and time again. If you find a stock that meets 4 or 5 of these criteria then you have a stock with a lot of potential. I hope you can take advantage of these tips and implement them in your future picks.

 

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