This really is dedicated to people who want to spend money on individual stocks. I has shared along the methods Personally i have tried through the years to pick stocks i have realized to become consistently profitable in actual trading. I like to work with a blend of fundamental and technical analysis for picking stocks. My experience indicates that successful stock selection involves two steps:

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

This two-step process enhances the odds how the stock you choose is going to be profitable. It also provides a transmission to market ETFs that has not performed as expected if it’s 50-Day EMA drops below its 100-Day EMA. It is a useful method for selecting stocks for covered call writing, quantity strategy.

Fundamental Analysis

Fundamental analysis will be the study of economic data including earnings, dividends and money flow, which influence the pricing of securities. I use fundamental analysis to assist select securities for future price appreciation. Over recent years Personally i have tried many strategies to measuring a company’s growth rate in an attempt to predict its stock’s future price performance. I used methods including earnings growth and return on equity. I have realized the methods are not always reliable or predictive.

Earning Growth
As an example, corporate net income is be subject to vague bookkeeping practices including depreciation, income, inventory adjustment and reserves. These are common be subject to interpretation by accountants. Today more than ever before, corporations are under increasing pressure to beat analyst’s earnings estimates which ends up in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their balance sheet for such things as failed mergers or acquisitions, restructuring, unprofitable divisions, failed website, etc. Many times these write-offs are not reflected as being a drag on earnings growth but instead make an appearance as being a footnote with a financial report. These “one time” write-offs occur with more frequency than you could possibly expect. Many firms that form the Dow Jones Industrial Average have got such write-offs.

Return on Equity
One other indicator, which I have found isn’t necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates an increased return on equity with successful corporate management that’s maximizing shareholder value (the larger the ROE the better).

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

The answer then is Merrill Lynch by measure. But Coca-Cola includes a greater ROE. How are these claims possible?

Return on equity is calculated by dividing a company’s net profit by stockholder’s equity. Coca-Cola is so over valued the reason is stockholder’s equity is just corresponding to about 5% of the total rate of the company. The stockholder equity is so small that just about anywhere of net profit will develop a favorable ROE.

Merrill Lynch on the other hand, has stockholder’s equity corresponding to 42% of the rate of the company as well as a greater net profit figure to make a comparable ROE. My point is ROE doesn’t compare apples to apples therefore isn’t a good relative indicator in comparing company performance.
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