This can be committed to those of you who want to spend money on individual stocks. I want to share along with you the strategy I have tried personally through the years to choose stocks that I are finding being consistently profitable in actual trading. I want to work with a mix of fundamental and technical analysis for selecting stocks. My experience indicates that successful stock selection involves two steps:

1. Select a standard with all the fundamental analysis presented then
2. Confirm the stock can be an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being across the 100-Day EMA

This two-step process enhances the odds the stock you choose will likely be profitable. It even offers a signal to market Automatic Income Method which includes not performed not surprisingly if it’s 50-Day EMA drops below its 100-Day EMA. It can be another useful method for selecting stocks for covered call writing, a different type of strategy.

Fundamental Analysis

Fundamental analysis may be the study of economic data such as earnings, dividends and cash flow, which influence the pricing of securities. I use fundamental analysis to help select securities for future price appreciation. Over time I have tried personally many methods for measuring a company’s growth rate so as to predict its stock’s future price performance. I manipulate methods such as earnings growth and return on equity. I are finding the methods aren’t always reliable or predictive.

Earning Growth
For instance, corporate net profits are susceptible to vague bookkeeping practices such as depreciation, cashflow, inventory adjustment and reserves. These are common susceptible to interpretation by accountants. Today more than ever before, corporations are under increasing pressure to overpower analyst’s earnings estimates which leads to more aggressive accounting interpretations. Some corporations take special “one time” write-offs on the balance sheet for things such as failed mergers or acquisitions, restructuring, unprofitable divisions, failed website, etc. Many times these write-offs aren’t reflected as being a drag on earnings growth but rather make an appearance as being a footnote over a financial report. These “one time” write-offs occur with an increase of frequency than you may expect. Many companies that form the Dow Jones Industrial Average have 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 a top return on equity with successful corporate management that’s maximizing shareholder value (the larger the ROE the better).

Which company is more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%

The answer is Merrill Lynch by any measure. But Coca-Cola carries a much higher ROE. How are these claims possible?

Return on equity is calculated by dividing a company’s net gain by stockholder’s equity. Coca-Cola can be so over valued the reason is stockholder’s equity is just equal to about 5% of the total monatary amount of the company. The stockholder equity can be so small that almost any amount of net gain will create a favorable ROE.

Merrill Lynch conversely, has stockholder’s equity equal to 42% of the monatary amount of the company and needs a much higher net gain figure to generate a comparable ROE. My point is always that ROE will not compare apples to apples therefore is very little good relative indicator in comparing company performance.
For additional information about Automatic Income Method check out this web site: look at here now