How to Choose Good Stocks

Investors should keep in mind that stock market volatility. While this is its nature, some investors begin to regret that stock prices have fallen whenever the market has fallen. Some investors are confused about what to do with their investments. Many people are in trouble because if they decide to sell, they will eventually record the loss. As a result, they have no choice but to wait for the stock to rebound. But stock market experts believe that if investors choose a good stock, regardless of market volatility, investors will believe that they will return home with the best return. This means they will not be disturbed by the anxiety of the bear's luck, which is often witnessed in the stock market. However, the choice of good stock is not an easy task. Although investors use different methods and processes to select stocks; the following steps will help you.

* Price

The first thing to look at is the price of the stock. Price is the absolute determinant of returns. A company's share price is $ 10, more attractive than $ 15. To further illustrate the importance of price, a company earns $ 5 per share at $ 20 per share, which is the same $ 5 per share that the other company buys better than the other company, but sells for $ 200. A $ 20 price would yield a 25% yield, while a $ 200 return on sales would be 2.5%.

* Revenue Sources

Company Products / Services Identify revenue sources and cash flows. The value of any asset is the net present value of its discounted cash flow. Before an investor can even begin to focus on the business, it is important to know what is generating cash. It is also important to be specific and to avoid making assumptions. It is also wise to know that the business the company is operating in order to determine whether the product is in high demand and know period. This will allow you to know when the company generates the most cash.

* Cash Flow Sustainability

If a company operates as a monopoly, there is every trend that it will enjoy high cash flow. One way to assess the sustainability of cash flows is therefore to examine entry barriers to the markets or markets the company operates. Because competitors are more difficult to enter a business that requires high capital, rather than a small amount of capital only need to start the retail business.

The Company's operating in a prosperous industry does not guarantee a good profitability. The people who run the company are important to their successful operations. For a time, the banking industry was very attractive, many entrepreneurs came in, but many banks were in trouble because of poor management. As a result, an industry may flourish, but some companies operating in the sector may still be underperforming. Therefore, in considering the purchase of company stock, you need to understand the company's board of directors and management.

Look at the gains. A company that does not develop profitable growth can not get a good return because it is not enough to declare dividends. When a company does not declare a dividend, it does not attract high demand that may lead to capital appreciation. Profit growth does not necessarily need to be high, stable and consistent growth is sufficient.


You must ensure that the company pays a healthy dividend. What if they pay for a healthy one? Do they often grow? Consider the payout rate if it is also healthy? Note any inconsistencies and may find out why.

* Policy Consistency

If management issues inconsistent or conflicting policy statements, avoid such companies. For example, a company said in its previous annual report that debt reduction is the most important priority, but they are not honest when they engage in multiple acquisitions or start new business with new debt. Investing in such stocks is dangerous.