Hey there. Back again and today I wanted to talk about the best stock to buy. If you have been around the block a bit, then you know that these kinds of articles typically yield a list of stocks that represent someone's idea of the best stocks to buy now or in a certain year. As I mentioned in my last post about good stocks to buy, I called into question the legitimacy of some of these stock market investing recommendations based on the conflicting news stories. On the one hand, Macy's was upgraded to a BUY from a hold by Citigroup. At the same time, on the same day, no less, Macy's was also predicted as one of the top twenty possibilities to file bankruptcy in the next 12 months. So, who do you believe? If you read my article you also know that Macy's earnings and sales stink right now, so why is anyone really buying that stock to begin with. Your guess is as good as mine. Since their's really no good fundamental reason to buy that stock I think I'll pass.
What Are The Best Stocks To Buy Now
The best stock to buy now (and always for that matter) is one that has three characteristics. Strong earnings, strong sales and strong return on equity. This is always your first check to see whether a stock is worth buying. With so many stocks out there, why choose ones that aren't earning money. It's hard enough to pick winners, why make it even harder by buying one that might be losing money. It really is just common sense. Buy stocks that are the best earners and you'll more likely raise your ratio of winning stock picks to losing stock picks.
Look for companies that earnings per share of at least 25% over the last quarter and over 25% increase in sales as well. You can put your threshold where ever you want because you will find stocks with a lot larger increases than that. As far as return on equity, look to buy stocks that have at least a 17% return on equity.
These are rules developed by William O'Neil who created the CANSLIM investing strategy. The C which is the first letter in the acronym stands for:
C= Current earnings per share should be up 25% or more and in many cases accelerating in recent quarters. Quarterly sales should also be up 25% or more or accelerating over prior quarters.
This takes care of the first letter in the strategy. The next letter, the letter A stands for:
A= Annual earnings should be up 25% or more in each of the last three years. Annual return on equity should be 17% or more.
You'll want to start your stock search to find the best stock to buy by weeding out companies that don't meet that criteria.
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