Investing In The Stock Market, No Finance Degree Needed

How do you know when it is time to move into a stock? Follow these simple facts and you will have your answer.

Always adapt a strategy and portfolio to fit the latest trends on Wall Street. Invest only in healthy, growing stocks and avoid companies that are seeing their sales and profits shrink.

Approaching stock picking is a lot like buying a car. When you buy a car, you look at the gas mileage, the warranty, the horsepower, the safety features, and a host of other options. The same rules apply to stock picking, you need to “look under the hood” to make sure that your investments are safe, reliable, and ready to perform.

There are 8 fundamentals that you should study when selecting stocks:

1) You should look to see if your stock has had it’s earnings estimates increased by analysts. This usually tips us off to a stock that is about to beat earnings. Positive earnings revisions are a good thing for sure.

2) And speaking of beating earnings, look for a stock that has been able to beat it’s earnings estimates and by how much. This is an important number to watch, because it often says Wall Street isn’t paying much attention to this stock yet or doesn’t yet “get.”

3) You should look for a company consistently growing it’s sales over time. Why you ask? Because this is one number that is hard to fake. Steer clear from companies that use questionable accounting practices. Sales growth is a solid indicator.

4) if a company is expanding operating margins, this will tell you if earnings are growing faster than sales. A company that is able to expand it’s operating margins is usually a company that has a dominate position in the industry. A company that can raise prices without seeing a drop off in sales is a wonderful thing to be able to do.

5) Can you say free cash flow? This says how much money a company has left over after paying the costs of its business. A strong cash flow is important because it allows a company to invest more resources in growing its business.

6) Earnings growth is the heart of all good financial analysis. As long as any company is able to grow its earnings consistently, the stock will do well.

7) And it is not enough to see a company’s earnings grow, you also want to see them grow rapidly!

8) The return on equity or ROE is the gold standard. ROE tells you how efficiently a company is managing its resources. You can’t interview every senior manager at a company, so the ROE is a report card for management.

Just like when you are out there doing your homework for your dream car, do your homework on how to pick your next stock and follow these 8 steps. You definitely don’t want a lemon in a car and I think it is fair to say that you don’t want a dud of a stock pick either. Both can and will hit you hard in the wallet.