This can be dedicated to individuals who wish to put money into individual stocks. I wants to share together with you the strategy I have used over the years to select stocks that I have discovered to get consistently profitable in actual trading. I prefer to use a mixture of fundamental and technical analysis for choosing stocks. My experience indicates that successful stock selection involves two steps:

1. Select a regular while using fundamental analysis presented then
2. Confirm how the stock is surely an uptrend as shown by the 50-Day Exponential Moving Average Line (EMA) being across the 100-Day EMA

This two-step process increases the odds how the stock you choose will probably be profitable. It even offers an indication to offer Automatic Income Method which has not performed not surprisingly if it’s 50-Day EMA drops below its 100-Day EMA. It is a useful means for selecting stocks for covered call writing, a different sort of strategy.

Fundamental Analysis

Fundamental analysis could be the study of financial data like earnings, dividends and your money flow, which influence the pricing of securities. I use fundamental analysis to help you select securities for future price appreciation. Over the years I have used many means of measuring a company’s rate of growth so as to predict its stock’s future price performance. I have used methods like earnings growth and return on equity. I have discovered the methods aren’t always reliable or predictive.

Earning Growth
For example, corporate net profits are at the mercy of vague bookkeeping practices like depreciation, cashflow, inventory adjustment and reserves. These are at the mercy of interpretation by accountants. Today more than ever before, corporations are under increasing pressure to conquer analyst’s earnings estimates which results in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed developing the site, etc. Many times these write-offs aren’t reflected like a continue earnings growth but rather arrive like a footnote on the financial report. These “one time” write-offs occur with increased frequency than you might expect. Many firms that form the Dow Jones Industrial Average have taken such write-offs.

Return on Equity
One other popular indicator, which has been found isn’t necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a higher return on equity with successful corporate management that is certainly maximizing shareholder value (the larger the ROE the greater).

Recognise the business is a lot more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%

The solution is Merrill Lynch by any measure. But Coca-Cola has a higher ROE. How is possible?

Return on equity is calculated by dividing a company’s net gain by stockholder’s equity. Coca-Cola is so over valued that its stockholder’s equity is merely comparable to about 5% in the total monatary amount in the company. The stockholder equity is so small that almost anywhere of net gain will create a favorable ROE.

Merrill Lynch on the other hand, has stockholder’s equity comparable to 42% in the monatary amount in the company as well as a greater net gain figure to make a comparable ROE. My point is that ROE does not compare apples to apples therefore is very little good relative indicator in comparing company performance.
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