How do you select which stocks to invest in the current fluctuating market? I use the word fluctuating simply because generally every Tom, Dick and his dog knows that the U.S. economy is crawling and the unemployment is surely not going to improve in another two or three months. The world’s largest stock market is primarily driven by reports, lots of them, which are to be released almost on weekly basis. If there’s one type of investor who like the current stock market climate, that type of people is definitely day-traders.
But what should non day-traders do in the meantime? Should you follow big time money managers such as mutual funds? With so much information available online, you can basically track which stocks the big boys are buying and they normally put their money on Mondays. You may be able to make some pocket money following such funds but the trail or meat you’re following can become your poison as well simply because they dump shares faster than you blink your eyes.
Have you ever wonder why stocks change direction after the so-called stock experts release their opinions / analysis, assuming they’re not trying to dump to you when they made that “Buy” call? The simple answer is the current stock market (in fact the whole financial markets) has mutated to become a very complex animal. A sudden jump in stock price or a nonsense pullback can practically mean anything, leaving many technical analysts scratching their head.
In case you didn’t know, more and more people are putting their money into stocks on quarterly basis. The reason is pretty simple – these companies report their earnings quarterly so if you don’t like what they’ve done last three months, dump them because if you don’t the fund managers will make sure you’ll have sleepless nights. So what are the tips from earnings report that you should be aware of?
1) Did the company beat the analysts estimate by a mile? It would be disastrous buying or holding a company stock that missed the earnings estimate when it consistently beat previously, what more with a company that frequently miss analysts estimate.
2) Besides top-line and bottom-line growth, does the company has any intention of passing the goodies (profit) in terms of dividend to shareholders? Such discussion will almost take us to stocks such as Apple Inc. (Nasdaq: AAPL, stock). While it’s true that Apple is notoriously known for giving crazy conservative guidance, a sudden announcement of dividend payout would send everyone’s jaw dropping.
3) How much a company made in America is not important anymore. It’s about how much a company made overseas that would interest the investors nowadays. For instance, Apple’s iPhone 4 sales in China were fabulous so much so that scalpers were making easy US$100 bucks per unit after the 200,000 units were sold out. And we’re talking about China which has more than 800 million mobile subscribers.
4) Did the company blame everyone else except themselves when they missed their earnings? If you happen to hold positions in such companies you should know what to do. Such chief executives should be fired and export to country such as Malaysia to become politicians because they would do marvellous there.
5) What is the company’s projection for the subsequent quarter or year (2011)? If the company couldn’t provide such guidance but instead beat around the bush, dump them. Of course there’re companies who don’t provide guidance such as Apple Inc. so you need to know the difference *grin*.
6) Did the company managed to increase its customer base from its competitor? Whether the company actually “stealing” more customers due to its own innovative products, genius marketing plan or simply because the competitor sucks doesn’t really matter. It’s quite an achievement to be able to “lock-in” customer and “lock-out” competitor hence the reason why Research In Motion Limited (Nasdaq: RIMM, stock) was beaten down (losing market share) until its recent earnings announcement
There are more to add to the list but the fundamental check-list is basically there. Remember to not fall in love with stocks otherwise you would be slaughtered like a pig. The moment your stock does not meet your criteria, dump them. And of course do not hate stocks that are not doing well now because you’ll never know when another Steve Jobs would join a company and turnaround the company to be another star. Do your own study and research and listen to both side of a coin – supporters and critics.
Other Articles That May Interest You …
- 7 Things about Investing Stocks in October You Should Know
- Top 20 Stocks with Good Dividend Yield
- Top 100 Best Global Brands – Technology Co. Rules
- RIM Beat Forecasts, BlackBerry is Not Dead Yet
- Top 5 Things to Do to Make Money Investing Stocks
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October 4th, 2010 by financetwitter
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You have one assumption terribly wrong that is stock analysts do dump their shares on you when a buy call is issued and vice versa. Do your own research, know your market and listen to your inner self. If you cant do that put your money in the bank instead.Put your money in mutuals and you ll help them to enrich themselves while dumping the baby on to you when it comes. Heads they win, tails you loose.