Tuesday, September 8, 2009

Best Investment

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Even with the uncertainty of the market, I still think the best investment you can make is in common stocks. The indexes were a no brainer today as all were up today on higher volume. This was a good sign but the markets are still under some selling pressures. It's not enough though to pick any stock. You've got be selective about which ones you buy.

The best investments you can make before you invest is your time. After you are sure which way the market is headed, take time to research a stocks fundamentals and it's chart before you invest. You can't base a stock's value on fundamentals alone or on it's chart by itself. It's a combination of the two that really help you hone in on whether a stock is a buy or not for your portfolio.

OK. So what are you looking for?

The very first test you are wanting your stock to pass, is earnings. We call this test a stock screen. To clarify, we are looking at earnings per share or eps compared to same quarter a year ago to take out seasonal factors. We're looking for the percentage change. It's recommended by the CANSLIM stock strategy that eps be at least 18-20% higher than the year before. Set a minimum threshold for the stocks you choose. It's not uncommon for people to make that threshold a 25% increase. Look at least the prior two quarters.

The second test that you want to see is if earnings are accelerating or decelerating. You should be looking at an eps that is growing each quarter and not looking smaller. While a stock may go up in price with earnings decelerating, you don't necessarily have to purchase it. Patience in the market will serve you well. Strong earnings per share is the number one factor you should use in your stock selection.

Once you've confirmed that earnings per share meet your requirement, the next screen you want use is sales. Make sure that sales are increasing over the same quarter from the previous year at a rate of at least 25% or more in the last two or three quarters as well.

The best investing methods focus on a companies earning and sales that are up substantially and accelerating. Why waste time stock market investing with subpar numbers. Spend your time focusing on the real deals. The ones that are actually earning good money. This is what the institutional investors are looking for and if you find it when they do, and come along for the ride, you are going to get some of the best investment rates going. That's our objective here at Stock Market Investing Today.

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