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Sri Lanka Equity Forum » Stock Market Talk » Stock-Picking Strategies

Stock-Picking Strategies

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1 Stock-Picking Strategies on Sat Jun 23, 2012 12:23 pm

Sisira

avatar
Equity Analytic
Equity Analytic
When it comes to personal finance and the accumulation of wealth, few subjects are more talked about than stocks. It's easy to understand why: playing the stock market is thrilling. But on this financial roller-coaster ride, we all want to experience the ups without the downs.

In this tutorial, we examine some of the most popular strategies for finding good stocks (or at least avoiding bad ones). In other words, we'll explore the art of stock-picking - selecting stocks based on a certain set of criteria, with the aim of achieving a rate of return that is greater than the market's overall average.

Before exploring the vast world of stock-picking methodologies, we should address a few misconceptions. Many investors new to the stock-picking scene believe that there is some infallible strategy that, once followed, will guarantee success. There is no foolproof system for picking stocks! If you are reading this tutorial in search of a magic key to unlock instant wealth, we're sorry, but we know of no such key.

Free Trading Guide - GFT
This doesn't mean you can't expand your wealth through the stock market. It's just better to think of stock-picking as an art rather than a science. There are a few reasons for this:
1. So many factors affect a company's health that it is nearly impossible to construct a formula that will predict success. It is one thing to assemble data that you can work with, but quite another to determine which numbers are relevant.

2. A lot of information is intangible and cannot be measured. The quantifiable aspects of a company, such as profits, are easy enough to find. But how do you measure the qualitative factors, such as the company's staff, its competitive advantages, its reputation and so on? This combination of tangible and intangible aspects makes picking stocks a highly subjective, even intuitive process.

3. Because of the human (often irrational) element inherent in the forces that move the stock market, stocks do not always do what you anticipate they'll do. Emotions can change quickly and unpredictably. And unfortunately, when confidence turns into fear, the stock market can be a dangerous place.

The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory - a "best guess" of how to invest. And sometimes two seemingly opposed theories can be successful at the same time. Perhaps just as important as considering theory, is determining how well an investment strategy fits your personal outlook, time frame, risk tolerance and the amount of time you want to devote to investing and picking stocks.

At this point, you may be asking yourself why stock-picking is so important. Why worry so much about it? Why spend hours doing it? The answer is simple: wealth. If you become a good stock-picker, you can increase your personal wealth exponentially. Take Microsoft, for example. Had you invested in Bill Gates' brainchild at its IPO back in 1986 and simply held that investment, your return would have been somewhere in the neighborhood of 35,000% by spring of 2004. In other words, over an 18-year period, a $10,000 investment would have turned itself into a cool $3.5 million! (In fact, had you had this foresight in the bull market of the late '90s, your return could have been even greater.) With returns like this, it's no wonder that investors continue to hunt for "the next Microsoft".


Read more: http://www.investopedia.com/university/stockpicking?utm_source=basics&utm_medium=Email&utm_campaign=Basics-6/22/2012#ixzz1yb412r7t

2 Re: Stock-Picking Strategies on Sat Jun 23, 2012 1:38 pm

sriranga

avatar
Co-Admin
If you are reading this tutorial in search of a magic key to unlock instant wealth, we're sorry, but we know of no such key.
Fact.
Thanks a lot.

http://sharemarket-srilanka.blogspot.co.uk/

3 Re: Stock-Picking Strategies on Sat Jun 23, 2012 2:07 pm

Redbulls

avatar
Director - Equity Analytics
Director - Equity Analytics
Thanks Sisira.

4 Re: Stock-Picking Strategies on Sat Jun 23, 2012 11:31 pm

nivekrulz

avatar
Stock Analytic
Stock Analytic
you can call me a junior to CSE .. . i already invested in HVA and Fortland ,small amounts just to get familiar with the market's mechanism and now looking forward to go for higher investment.. rs 1 million plus. does any one have any recommendations how i should invest , and make my strategy to get the highest possible return. im interested in short-medium term investments.
please recommend me on
which shares are best -
how is should bid. whether to divide the overall sum and bid for small quantities regularly . or to bid with the whole sum at once .
how ,when , to place the sell order,and whether to sell all at once. etc. please advise me on how i should start

5 Re: Stock-Picking Strategies on Sun Jun 24, 2012 3:36 pm

opfdo

avatar
Vice President - Equity Analytics
Vice President - Equity Analytics
@nivekrulz wrote:you can call me a junior to CSE .. . i already invested in HVA and Fortland ,small amounts just to get familiar with the market's mechanism and now looking forward to go for higher investment.. rs 1 million plus. does any one have any recommendations how i should invest , and make my strategy to get the highest possible return. im interested in short-medium term investments.
please recommend me on
which shares are best -
how is should bid. whether to divide the overall sum and bid for small quantities regularly . or to bid with the whole sum at once .
how ,when , to place the sell order,and whether to sell all at once. etc. please advise me on how i should start

hi,

i can say buy this & that not this & that.
Try to study the financial reports. (Income Statement, BS & Cash flow). calculate PE, Consider their NAVPS. Keep on eye on other income (non-recurring). Select low PEs & less than NAVPs. Monitor the trading volumes. This is little bit for you.

6 Re: Stock-Picking Strategies on Sun Jun 24, 2012 5:46 pm

Kumar

avatar
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@opfdo wrote:
@nivekrulz wrote:you can call me a junior to CSE .. . i already invested in HVA and Fortland ,small amounts just to get familiar with the market's mechanism and now looking forward to go for higher investment.. rs 1 million plus. does any one have any recommendations how i should invest , and make my strategy to get the highest possible return. im interested in short-medium term investments.
please recommend me on
which shares are best -
how is should bid. whether to divide the overall sum and bid for small quantities regularly . or to bid with the whole sum at once .
how ,when , to place the sell order,and whether to sell all at once. etc. please advise me on how i should start

hi,

i can say buy this & that not this & that.
Try to study the financial reports. (Income Statement, BS & Cash flow). calculate PE, Consider their NAVPS. Keep on eye on other income (non-recurring). Select low PEs & less than NAVPs. Monitor the trading volumes. This is little bit for you.

Good advice mate.
Thanks Sisira.

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