Thursday, May 15, 2008
Fundamental and Technical Analysis-What to Buy and When
Fundamental analysis can tell you what Gourmet Food Gift Basket buy structured settlement protection act technical analysis can tell you when to buy. The easiest way to use fundamentals to screen for stocks is to go to Yahoos Finance Stock page and set up a screener. I like to use Warren Buffett's strategy and look for stocks with low Price to Book ratios, high return on assets, high return on equity, high growth rates, stable predictable earnings, and low debt. Here is what a typical screener might look like:
Return on Assets >= 10
Price Book Ratio <= 6
Earnings growth >= 10
P/E <= 18
Total debt/equity <= 0.2
Return on Equity >= 12
You can adjust the figures to yield a manageable size list of stocks. I like to tweak the settings until I have a list of about 20 or less. Ignore any with negative earnings, or adjust your screener.
Now you should have a Copyright Your Work! Protect your work from copying and plagiarism and get peace of mind. list of interesting candidates. Next use technical analysis to determine when to buy. For that step you need at least a basic French fries of reading charts. Look at a chart of each candidate, in multiple time frames. I like to use Bigcharts.com You can use the advanced chart feature and configure all the settings.
One very important criterion is earnings stability. I like to see earnings that are growing steadily and not dancing around. If a stock's earnings bounce from positive to negative and back to positive, it is too unstable to predict. Stocks need to exhibit steady, stable earnings growth. I like to look at volume, rolling EPS, and P/E. that will give you a good feeling for the timing. I look for stocks that have been beaten down, but are being accumulated on significant volume. Once you have used the steps above, you have identified good candidates. Proficiency in reading charts will help you identify when to buy those good companies.
Identifying good companies by their fundamentals and timing the purchase (or sale) by technicals has allowed me to handily beat the market in my own portfolio, and I data raid recovery it will help you too.
Wayne Zickefoose has an MBA from the University of Southern California (USC), has studied the stock market for 21 years, and is a Land Banking expert in the Southern California area. You may contact him at TwoPercentSecret.com
