Is out there it’s just unlikely you’ll find it first.īuy into companies with a history of superior earningsīuy into companies with barriers to entry so they can continue to earn superior returnsīuy into companies with a track record of making wise capital-reinvestment decisions They want the Next Big Thing - the stock that will make them both rich and smart. Anything can happen.Ĭlimbing on bandwagons: Many people buy stocks but aren’t stock investors. It doesn’t matter how well you think you know a company. Many successful investors recommend having about 20 to 25 stocks in a personal portfolio. Don’t waver.Īnd it’s not just about one stock. Have a philosophy that you stick to that can be easily replicated and consistently applied. If shares head south, you have to be ready to break it off and sell. Love-struck stocks: Falling in love with a stock can bring reward, satisfaction and visions of a long-term relationship. It’s tough to be skeptical when you’re told what you want to hear, but doing otherwise puts you at risk of being separated from your money by fraudulent promoters. If you and others like you buy into such a pitch, your demand will only boost the stock price, turning a tidy profit for those who bought in earlier than you - often the very folks pumping the stock - who then sell, tanking the shares and leaving newcomers with big losses.ĭon’t take the bait. The stock usually is thinly traded on the less-policed over-the-counter market, also called the Pink Sheets. Whatever the delivery method, the classic “pump-and-dump” contains the same message: Buy this stock now, before everyone learns about the firm’s newest widget.
With stocks, the players at the table are internet chat rooms and bulletin boards, spam email, investment newsletters, and even television and radio. ‘Pump and dump’ scams: As the old saying goes: Look around the poker table if you can’t see the patsy - you’re it. Longer investment horizons smooth the ride down Wall Street and make market losses less likely. Time gives individuals a rare edge over short-term-minded institutions and hedge funds, which tend to trade frequently. Leave impulse buying for the supermarket and out of the stock market. Relying on unsubstantiated claims, rumors and online tips - or your next-door neighbor - is a mistake. Don’t make investment decisions solely on one or two sentences of hype. Hunches and headlines: Good companies aren’t always good stocks, and basing decisions on hunches and headlines is not an investment strategy. You could invest in the best company, but if you’re overpaying for it, you could end up losing money because the stock price already reflects the reason you’re buying the stock. That sports drink you can’t get enough of, for instance the market probably knows it’s a top seller and has bid up the stock accordingly. Be cautious about highfliers that may be closer to the end of their runs than the beginning. Purchase price, more than the selling price, determines return on investment. Company websites should post 10-Q quarterly reports and 10-K annual reports, or the Securities and Exchange Commission website offers these and other informative disclosures. These documents tell you whether management makes, spends and invests shareholders’ money wisely. “A company may have a high P/E, but, until you know what the earnings growth is, it’s hard to ascertain whether the stock is attractive or not.”Īlso, study the corporate balance sheet, a financial summary that - along with the cash-flow and income statements - reflects the quality of earnings. “It’s the biggest metric we look at,” said Alec Young, a global equity strategist at Standard & Poor’s. But if analysts expect 30% earnings growth for the company over the next year, a PEG ratio of 1.0 is eye-catching. The price-to-earnings-growth ratio, or “PEG,” should be at or close to 1.0.įor example, a stock at 30 times earnings might seem overpriced if the average company in the industry commands a price-to-earnings ratio, or “P/E,” of 20. (Here’s the quote page for Apple.) You’ll be able to look at charts, the company profile, news about the company, see financials and SEC filings, learn what insiders are doing and see what the analysts say.Ĭompare a stock’s price to its expected earnings-growth rate. For both custom and ready-made screens, try Morningstar and Zacks.Ĭheck out the quote pages on MarketWatch for stocks you are researching.
Check out the American Association of Individual Investors, which features several dozen screening programs.
BEST STOCKS TO BUY IN MARKETWATCH GAME PROFESSIONAL
Professional investors follow myriad sleuthing methods, from computerized screening programs to gumshoe field work.
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