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I am a beginner and I am looking for some advice for investing in stocks
That's a great question!
To start with I look at revenue. Go to Yahoo or Marketwatch or some of the other sites and pull up the Income Statement for the last 3 - 4 years. What you are looking for, of course, is an increase in revenue.
Then look at Gross Profit. You're looking for the same thing - an increase.
And then Operating Income. Same thing.
Then I go to the chart. You are looking for a chart that is either rising or steady. You probably don't want to buy something that is dropping - at least not at this stage of your investment career.
Learn Fundamental Investing. That means you need to learn all about the three reports - Income, Balance Sheet, and Cash Flow. It will take a while, but it will be worth it.
Most traders around here are chart traders - that is, they know very little about the companies they have invested in and never look at financials; they only look at charts.
A good Source for learning is "Ratio Analysis Fundamentals", which is a small Kindle Book. There is a website also.
I try to learn as much as the CEO about my stocks. I read everything I can find on them and invest heavily in a few stocks. But you'll find your own style.
-Why are you buying it. The gold mining stocks right now are heavily out of favor. You have to ask yourself, are they all going to go bankrupt? Probably not.
Are there deep structural problems in the sector? Like Alcoa, a Dow 30 component. Its been crushed since 08. Cheaper aluminum prices, rise in competition from China.
-You have to look at risk, and reward. Not just reward.
The risk can be quite high, say on a technology stock. 3D printing stocks are hot now. Some stocks are like hot potatoes.
-Back to common sense, and industry history. For example, I think facebook is pretty much a fad, FB. If you look at the history of the web, there have been many popular sites. Myspace. Yahoo was at one time the most popular search engine. There are very low barriers to entry online. It's very hard to monetize, gain revenue from eyeballs seeing your site. Why would you pay hundreds of times earnings, or many multiples of price to sales for an internet stock?
-I would also be skeptical of stocks where everything is perfect. I.e. ebay in the mid 2000's. It had 90% market share, huge growth and success from the late 90's. Now look at the site, lol.
I am a beginner and I am looking for some advice for investing in stocks
I look at a combination of factors: earnings per share, sales growth, profit margins, debt to equity ratio, relative strength, mutual fund ownership, price and volume action among others.
In spite of this, I find investing profitably in individual stocks to be not easy.
-Why are you buying it. The gold mining stocks right now are heavily out of favor. You have to ask yourself, are they all going to go bankrupt? Probably not.
Are there deep structural problems in the sector? Like Alcoa, a Dow 30 component. Its been crushed since 08. Cheaper aluminum prices, rise in competition from China.
-You have to look at risk, and reward. Not just reward.
The risk can be quite high, say on a technology stock. 3D printing stocks are hot now. Some stocks are like hot potatoes.
-Back to common sense, and industry history. For example, I think facebook is pretty much a fad, FB. If you look at the history of the web, there have been many popular sites. Myspace. Yahoo was at one time the most popular search engine. There are very low barriers to entry online. It's very hard to monetize, gain revenue from eyeballs seeing your site. Why would you pay hundreds of times earnings, or many multiples of price to sales for an internet stock?
-I would also be skeptical of stocks where everything is perfect. I.e. ebay in the mid 2000's. It had 90% market share, huge growth and success from the late 90's. Now look at the site, lol.
Not bad advice here.
I own the common sense ones that I see on a daily basis which have made me a lot of money. companies like
V, SAM, CMG, BWLD, TSGTY, etc
I am buying shares in Noodles and company when they go public.
I have found the brewery companies are good bets. I also like really boring food companies, oil companies (higher risk), utilities, and tobacco companies.
The ones that are the most boring companies are sometimes the best. Don't forget about REIT's and high dividend paying companies.
When buying REITS, try to diversify your holdings with different countries/currencies, sometimes that works out in your favor.
Common sense. You know what that is? That's when you do things the way I think they ought to be done.
Common sense will lead you to believe when water freezes, it shrinks. Nearly everything else does.
Common sense will tell you steel ships can not float; continents do not move. Common sense is a dangerous thing, sometimes.
I will make my case.
If you used common sense and just randomly threw darts at companies and invested in them in the 70's, 80's, 90's anyone could become a millionaire.
I mean there are some really obvious picks and still are. and if you purchase individual companies and stick with them and add new ones to companies you use and like, more than likely you will be a millionaire from tens of thousands of dollars.
I asked my parents what companies they use back in the 70's. Big oil companies were around, telephone, mcdonalds, Nike, Utility companis. My dad worked for Pillsbury and then eventually General Mills. He become a multi-millionaire just off his work companies.
If he threw some money in the big ones instead of mutual funds, we would have made much more money.
Honestly, look in your wallet, see the credit cards you own and invest in them. Where do you buy food? invest in it. Where do you buy gasoline, invest in it. Natural gas or utility you have? excel energy? invest in it.
It's easier to become a millionaire than you think. Hell, even I am almost one at 32.
Pick some good beer companies like SabMiller or Inbev, and a tabacco company or two. MO, PM.
easy money. Keep cost averaging in and hold on.
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