How to Pick Winning Stocks
Picking a winning stock is not an easy thing to do. Sometimes it is very tricky and wrong choices will lose you money. Fortune (June 25) help you choosing and finding best deals by giving some suggestions below:
- Great deals can often be found among stocks selling for less than 15 times earnings and are often discovered in out-of favor industries.
- A long history of strong cash flow, low debt, and steady dividend payments is a key sign of financial health.
- Patience is required, because it can take years for cheap stocks to rise.
- Small-company stocks are often ignored by Wall Street analysts and fly under the radar of big investors.
- Healthy free cash flow can help small companies fund expansion.
- Financial strength is crucial, since little corporations are more fragile; steer clear of enterprises with weak balance sheets.
- Long-standing blue-chip companies with established brands tend to have stronger pricing power than trendy operations with a hot product.
- Consistently sturdy earnings growth yields better results for long-term investors than explosive–but fleeting–expansion.
- Stocks with large dividends tend to hold up better during market downturns.
- Stocks selling at extremely low multiples relative to their projected profit growth can often turn into the market’s brightest stars.
- Don’t pursue shares just because they have been marked down. Bargain-priced growth stocks are often cheap for a good reason.
- One way to avoid disaster is to stay away from firms with high debt-to-equity ratios.
- Despite their strong performance in recent years, many foreign markets still appear undervalued compared with those in the U.S.
- Emerging markets remain risky and volatile, so target the bulk of your foreign investment in developed countries.
- Stocks selling near or below their book value are worth a close look.