Analyzing Companies To Invest in.

[AAAgent]

Okay for those Stock Jockies on the forum Just wanted some advice and opinions on how you guys choose companies to invest in.

Obviously speculation is part of this whole gambling process so you don't have to mention that.

So some things that i do are:

I analyze the capital structure(my old job) if i have time, otherwise i check how much debt they currently hold, how it compares to the past 5 years of their balance sheet. I then check the company's debt to equity ratio, i check the debt to equity ratio of the industry, check if dividends have been issued, news, products and history or the company, company direction, recent M & A's that can affect the company or M & A's affecting the industry.

I'm also familiar with calculating mda's.
I check bloomberg analyst recommendations and other analyst whether they say Buy/sell/hold.


Other than that i don't know much TA.

What do you guys do and do you have any opinions on what i do.

Can anyone here explain the reason for checking volume. Obviously when volume increases it's probably alot of selling/buying but how do you track this?

 

[Alle_Gory]

Volume is tracked on your trading platform. You should be able to see price as well as volume fluctuations.

If you don't see volume, then your trading platform sucks and you need to find a better one.

 

[AAAgent]

i have no problem with finding the volume, i just wanted a better understanding of how it effect trading and what signs to look for in volume changes in correlation with what they mean.

 

[Alle_Gory]

Volume is demand. Higher volume means more demand for that security. Expect prices to go up... usually.

If something bad happened to the company recently and news gets out, then a higher volume could mean that investors are dumping the stock. So expect the price to drop.

By itself, I don't think volume means much. You've got to combine it with your other indicators.

 

[n00bPimp]

Here are some basic rules on volume, they also apply when price goes up:
If price went down and volume was above average, there was strong selling and is likely to continue.
If price went down and volume was low, it means selling was weak and might be short lived.
When price goes down a little and volume is really high, it means selling is strong but buyers are barely budging. Anytime volume is really high and price barely moves, a huge move either up or down will happen soon.
When price goes down huge and volume is tiny, its either a trap or someone knows something and was getting rid of stock inventory asap. Lately theres been a lot traps caused by HFT algos, when you see a huge price move on little volume, stand back and sit on your hands.

 

[taiyuu_otoko]

check this out from stockcharts. Plenty of indicators to help you analyze volume. Particularly this one, and this one.

Absolute volume isn't all that important, as volume varies widely from stock to stock, but comparing short term moving average to long term moving averages can tell you a great deal. Prices going up on higher than average volume is good, prices going down on higher than average volume is bad.

For example, you can sort for stocks that are up in price with that particular days volume up over fifty percent of the 50 day moving average for volume.

Plenty of folks will tell you that all you need to know about a stock you can discern from price and volume action, as it is a reflection of everything else about a company.

 

[Julius_Seizeher]

Before you decide to analyze companies, the first thing to do is analyze your risk tolerance. Your risk tolerance will always equal your ambitions in the stock market, if you want to make real money you have to take real risk. Since I want to get rich in the stock market, I am a hardcore bull on upstart companies that I believe in. As I build more wealth in the market I will dial down my risk accordingly, but for the foreseeable future I am gungho. Most of the companies I invest in are various stages of OTC, and technical analysis/chart reading doesn't have as much bearing on there.

I consider myself a fundamental investor. I study the problems faced by the world, and then I search for the companies who are working to solve them.

Price of Gold is high>I think it's going higher>I love to buy gold mining stocks, but always young companies that are not producing yet. You have to do tons of due diligence on these companies, but I have seen others get RICH in new gold mines; it's worth it. You have to analyze the technical data available on the claims held by the company, joint venture possibilities, geo reports, etc. Gold mines are highly speculative and they require tons of capital before they can make a dollar; so the good part is, their stocks will trade dirt cheap for years before they start producing. But once they do, you get whiplash from the rocket blast!

I am also betting on silver, lithium, and uranium. The government has been holding silver down for years, there is a MASSIVE worldwide short position in silver, demand is growing, and the writing is on the wall. Lithium is going to take off as the use of lithium ion batteries, in everything from cars to tools, continues to skyrocket. There are also emerging industries that lithium will be critical to support.

And as for uranium, though we are wasting time and effort on other electric generation sources, nuclear is going to re-emerge as the new energy superpower in America. Hell they have reactors the size of a car that can power 20,000 homes now, tell me that is going to get beat by a stupid windmill! There is even a government endorsement for building new reactors, they are safe and exceedingly efficient these days. So I am placing a bet on uranium.

With all these miners, I am taking a big gamble because they are not producing yet. The beauty is, even if (worst case scenario) only 1 of my mines were to eventually produce, the profits on that lone company would still obliterate any losses I saw in the other stocks.



For a less risky approach, but good upside nonetheless, I recommend buying regional banks and silver & lithium ETFs. The regional banks stayed away from the toxic debt instruments and mortgage orgy, and many of them are making acquisitions and growing rapidly.

 

[AAAgent]

thanks noobpimp.

JS-im probably going to stay away from banks.

I've been pretty piss poor with investing in the market since i started during college.

put in 1k 3 years ago lost 650 and cashed out the rest.

put in 1k 2 years ago lost 600 and cashed out the rest.

put in $500 and lost like 300 of it. cashed out the rest.

I was mainly trying to learn but i had no knowledge to learn off of.

luckily i've learned alot in the passed couple of years. enough to atleast know how to find companies that will weather the storm not neccesarily make money in the market.

My goals are to make $100 first, 200, 400, 800, 1600, then whatever. I want to be able to do this consistently for stock's above the dollar before i start to get riskier and go penny's.

I will start studying for CFA this fall as well so that may help.

Companies i'm looking at are ATVI(maybe), F, S, siri, gg, and nflx.

 

[cavedweller]

AAA,

Check out the Morning Star ratings of stocks.

You may want to study (IBD) Investors Business Daily charts.

 

[cavedweller]

Also, check out the ETF's and charts for:

Cocoa

and

Natural Gas

Both of these are falling thru the floor..Once they flat line and start trading side ways you may want to buy in..(my 2 cents)

BTW, one camp says crude oil could fall to $18 and another camp says it will rise to $85..(the ETF--ticker---OIL---tracks the price of crude)

Also, www.seekingalpha.com has news and updates..

 

[blackomen]

It's best to know both the fundamentals and technicals of the stock you're holding. Even if you swear by fundamentals, learn some basic TA to catch a good entry/exit point when you actually make the trade. If you swear by TA, learn some basic fundamental analysis to filter out a company more likely to go up in the future..

 

[mpimpin]

try a stock simulator. We are using Otis in my Investments class and I'm impressed with it. It's the only one I've used so can't say how it compares.

 

[Bible_Belt]

I squeezed out a living in the 90's for a few years as a day trader of other people's money. I was taught to trade a trend-following system in which you tried to own the strongest stocks in the strongest sector while the market was going up, and then do the opposite on the downside by shorting the weakest. On a daily chart perspective, look at the stocks IBD puts in bold, as well as 52 week highs and lows. You have to time your entry points and more importantly these days know when to take profits - but those stocks should be what you consider as long and short positions. Time the entry so that they have backed off a little from a recent high and gone sideways, without volume completely disappearing. Even when you trade solely off fundamentals, technical analysis will help you with entry and exit points.

 

[synergy1]

Depends on how you wish to invest in companies. Graham breaks it down into two fundamental types; investors and speculators. I am not here to cast judgment on either, but I am more of an investor personally.

As an investor, you view buying company stock as being a silent partner to the company. Would you way to own a piece of a company at a given price? Part of your research has to include asking yourself this , 'is it worth owning a company that makes X for Y dollars?'. Imagine a lemonade stand that is losing money on a daily basis, would you want to pay 100 bucks to own a business that is costing its owner 250 dollars per day to operate? Probably not. This sort of due diligence is how one determines if they want to own part of a company or not.

This could be a rather exhaustive topic so i'll just hit on a few important things to look for. First, check to see if their earnings on a per share basis have been increasing over the last 10 years. This eliminates companies that might be hiding earnings/losses as things tend to regress over a long enough time period. Second, check the return on investment the company has gotten for its share holders- look for something over 10-15%. This means the company is good at taking its shareholders cash and making money on it. Next compare the share market price to that of the current treasury bonds and determine ones initial return on investment. This tells you if the current price is expensive or cheap.

There is so much more to security analysis, that a 1000 page book could be filled up. But the above is a basic idea of what ones due diligence will involve. The trick is knowing when to buy a good security for cheap; an economic downturn, industrial downturn, one time bad news piece etc. This will make good shares go for less. An example would have been goldman sachs which was selling for 67 bucks back in 08 when the entire stock market was ****. Now it trades at nearly 3 times that. (sure you can see better returns on penny stocks, but I the overall investment strategies are so different, they shouldn't be compared)

 

[AAAgent]

TA is not doing anything in this market.

 

[cavedweller]

AAA,

Study the commodity ETF stocks and market..

Mankind has been trading that stuff for over 5,000 years...

The bottom has fell out of cocoa and natural gas..(check the charts)

But guess what?---They always bounce back..

ie: Ford, GE or Sears may go bankrupt, but, folks will still be buying sugar, wheat, oil...ect, ect,

my 2 cents