lowtrade

[lowtrade]

Picking a position trade (3 to 6 months) or investment ( 9 months to years) without understanding fundamental analysis well. Here's another good old post about investing, not trading.


Market cap vs. EBITDA vs. Book value vs. enterprise value, why 4 ways to state company value?
Operating margin vs. profit margin vs. gross margins, which is important?
EPS & P/E how do these effect buy/sell decisions?
Insider & institutional ownership and recent investment direction, is this the most important way to judge company future?
Dividends or share buy backs, what should you want as an investor?
Short term, long term company debit and share short position size, does this show strength or weakness in the future?
What does diluted earning per share tell you about the future company share structure?
Financial income statements, balance sheets and cash flow documents are a companies health report, are you able to evaluated them?

Fundamental analysis can be complicated. Many analysis don’t rely on the same subjects, looking for the same results.

Is growth investing better then value investing and what is the difference?
What is the best investment vehicle in the market, ETFs, Indexes, Stocks?
Should I understand trading platforms, trading entities, and the workings of broker/dealers roles in the market, to invest?
Why read the SEC filings, what will they tell me, what should I look for?
Is all this knowledge and more necessary , should I just hire someone to handle my money?

Investment can be mind blowing. And after studying and learning and understanding all the above and more, you still can invest in the wrong company stocks! Believe me, I can answer and understand the info in all the questions above and wrong is easy. Why, because humans are involved.

There can be good companies with bad stocks and bad companies with good stocks. Perception can over rule facts. Power & size can control price & direction.

So how can you pick a good investment?

First, rely on, most entities which have size and tenure, have large pools of knowledgeable employees. Big guys are big, because they know what they are doing. Here is my secrete to increasing your odds of successful investing.

Do what the big guys do!!!

If you ever watch Cramer on TV, he considers himself a fundamental analysis. He knows how to evaluate companies financials, pipelines and fundamental standing. His #1 rule is pick the best of breed.

That’s exactly what I’m going to cover. How to find best of breed, see if other big guys are investing and the basic things you should want from your investment. You scan or screen for best of breed, research for big guy interest and compare to find personal goals.

I say fundamental analysis predicts future price, technical analysis projects it. Don’t forget to use TA & charting for entry, once an investment is decided on.

So lets start how to find best of breed.
www.finviz.com is a great place to screen. Start buy finding the best sector.
http://www.finviz.com/groups.ashx?g=sector&v=110&o=name
Note the sector averages to compare with the stock you choose to evaluate closer. A peice of paper comes in handy.
Next you want to find the best performance within that sector.
http://www.finviz.com/screener.ashx?v=141&f=sec_basicmaterials&o=-perf52w

Within the top you want to find steady consistent growth over time. Look at the weekly, monthly, half, and year % of growth. Write down on your paper, the stocks which grow small amounts each time frame. Not the ones which have large growth spurts. You can click the symbol to check the chart. You want long term tight up channels. Good examples are #5 TGA & #18 APL.

Once you scan all the stocks and have a list, move on to check what the big guys are doing. Type your symbol list into the tickers area, using ownership.
http://www.finviz.com/screener.ashx?v=131&f=sec_basicmaterials&o=-perf52w&t=TGA APL
Shorten your list to include the ones which have the largest institutional ownership, with increasing purchases and the smallest amounts of shorts.

At this point you have found the best of breed, with the largest big guy interest. This list could be played for position trades from 3 months to 6 months. If you want to invest 6 month to a year or more, you should have some amount of ROI to help reach personal goals. That requires one more step. Checking for dividends.

Again enter your short list into the ticker area, using financials.
http://www.finviz.com/screener.ashx?v=161&f=sec_basicmaterials&t=TGA,APL&o=-perf52w
Along with cutting out stocks which don’t offer dividend income, you can weed out stocks with subpar financial ROI Profit margins, or large long term debit.

These things you should understand. ROI is the companies return on investment. It shows how well the company is performing. Profit margins show management performance, and LT Debit shows stability. A company with small long debit and larger short debit says it has managed it’s cash well. IMO the most important area here is the dividend size and reliability. You want to know you will get something back in return for your investment long.

You can evaluate the dividend performance here.
http://dividendinvestor.com/

So there you go. Using those which know what they are doing, to help you find a good position or long term investment, with little or no experience evaluating fundamentals.

You have the best sector, the best of breed, (slow steady performance increases), the most big guys which agree and at least a known dividend return on your investment.