Re: 3 Steps to Picking Winning Stocks
Re: 3 Steps to Picking Winning Stocks
Source: http://newsgroups.derkeiler.com/Archive/Misc/misc.invest.stocks/2005−11/msg00272.html
• From: "Palmist" • Date: 3 Nov 2005 18:58:35 −0800 Hello angel_8866: Your post is really interesting and good. I am learning about investing in stocks. I have read a lot of books. I also maintain a blog. http://longtermstockideas.blogspot.com Please check my blog and let me know about what do you think. I just want to know if I am going in the right directions. I also want to create a website on stock ideas. Thanks, dwl800@xxxxxxxxx http://longtermstockideas.blogspot.com
angel_8866 wrote: > Stock picking is a very complicated process and investors have > different approaches. However, it is wise to follow the general steps > to minimize the risk of the investments. This article will outline the > steps for picking high performance stocks. > > Step 1. Decide on the time frame and the general strategy of the > investment. This step is very important becase it will dictate the > type of stocks you buy. > > If you decide to be a long term investor, you would want to find stocks > that have sustainable competitive advantages along with stable growth. > The key for finding these stocks is by looking at the historical > performance of each stock over the past decades and do a simple > business S.W.O.T. (Strength−weakness−opportunity−threat) analysis on > the company. > > If you decide to be a short term investor, you would like to adhere to > one of the following strategies: > > a. Momentum Trading. This strategy is to look for stocks that increase Re: 3 Steps to Picking Winning Stocks 1
Re: 3 Steps to Picking Winning Stocks > in both price and volume over the recent past. Most technical analyses > support this trading strategy. My advise on this strategy is to look > for stocks that have demonstrated stable and smooth rises in their > prices. The idea is that when the stocks are not volatile, you can > simply ride the up−trend until the trend breaks. > > b. Contrarian Strategy. This strategy is to look for over−reactions in > the stock market. Researches show that stock market is not always > efficient, which means prices do not always accurately represent the > values of the stocks. When a company announces a bad news, people > panic and price often drops below the stock's fair value. To decide > wether a stock over−reacted to a news, you should look at the > possibility of recovery from the impact of the bad news. For example, > if the stock drops 20% after the company loses a legal case that has no > permanent damage to the business's brand and product, you can be > confident that the market over−reacted. My advise on this strategy is > to find a list of stocks that have recent drops in prices, analyze the > potential for a reversal (through candlestick analysis). If the stocks > demonstrate candlestick reversal patterns, I will go through the recent > news to analyze the causes of the recent price drops to determine the > existence of over−sold opportunities. > > Step 2. Conduct researches that gives you a selection of stocks that > is consistent to your investment time frame and strategy. There are > numerous stock screeners on the web that can help you find stocks > according to your needs. > > Step 3. Once you have a list of stocks to buy, you would need to > diversify them in a way that gives the greatest reward/risk ratio. One > way to do this is conduct a Markowitz analysis for your portfolio. The > analysis will give you the proportions of money you should allocate to > each stock. This step is crucial because diversification is one of the > free−lunches in the investment world. You can learn more about the > Markowitz analysis at: http://www.cisiova.com/blogs/optimalportfolio > > If you take your time to follow through these three steps, you will > find your investment performance drastically improve. > > About the Author: Zheng Fang is the creator of Advance Stock Pattern > Scanner of http://www.cisiova.com. He runs several blogs that posts > daily stock picks free of charge for the investment community. These > blogs are accessible at: http://www.cisiova.com/analysis.asp .
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