Having A Good Stock Pick
Is Your First Step to Make Money in Stock Market
Summarized Overview
In this article you will find information about how to select a good stock quantitatively, why the strategy is so important and the critical key financial ratio.You will also find information on what is important in corporate annual reports.
Reasons to Have Good Stock Pick Strategy
Though there are thousands of stocks in stock market nowadays, not many of them are worth investing. In ever changing business environment, it is not easy for companies to remain profitable.
Worse, hardly any of them have shareholders' interest at heart. That is why, stocks represented by quality companies with effective management team is the key to get a higher investment return.
My Five Stock Screening Criteria
A good stock pick should've consider effective management as it is everything in sustainable stock investment. Thanks to financial ratios, picking good stock is just a simple math away.
Above average EPSGR and excellent ROE is my first stock screening criteria to filter rubbish stocks in the stock market. You can choose any figure which you feel comfortable. But, the figure 10 I chose is because:
- 10 per cent EPSGR shows that the company has reliable high demand products or services.
- 10 per cent ROE shows that the company are managing shareholders’ fund effectively.
- 10 consecutive years means the company able to survive the ups and down of the market, business cycles or the ever-increasing competition.
Past performance doesn't guarantee anything in the future for sure, but it is the best information for good stock pick. Should there be no changes in it's business foundation and it's management, profit will continue to be sustainable. For any circumstances, effective management will find ways to stay ahead of competition.
On top of that, i did consider:
- less than 0.6 debt to equity ratio (D/E) so that the company has manageable debt during economic crisis.
- high profit margin which shows the management really did a great job in reducing operating cost to maximise profits.
Be Consistent in Your Stock Selection Criteria
You have to be choosy and determined in selecting which stocks you'll be investing in.If you love speculative stocks, this method is not for you. Rumors and hot tips are just not my taste.
But if you are serious ininvesting for long-term, or value investing as what Warren Buffet did, this good stock pick can easily get rid of junk and worthless stocks straight from the beginning.
Test yourself, and see the result!
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