Learn Investing Secrets

From this group of 'safe' stocks, you select the ones most likely to have large appreciation.

A stock is cheap in my book if it sells below the liquidation value of its assets, and most cheap if it sells anywhere near the net amount of cash it has on hand. It may be that the stock will not go down, but will that stock go up?

Picking growing industries and growth companies is more than I can tell you here, but there are two simple things you can look for first: (1) Is the company buying its own stock, or has it bought its own stock at about this price, and (2) are the insiders making hefty purchases of their stock?

Next, you can look at the ratio of revenues or sales to market values or the dollar amount of sales per share.

It is important to note that every smart investor wants to minimize risk while maximizing profit potential. Yet conventional investment theory tells us that in order to increase returns, you have to increase risk.

You may be surprised to find that this conventional wisdom is not cosmically true.

When I was a professional stock trader, I made most of my profits from deference in my portfolio, not in short term trading. In other words, I was a position trader. Any losses in my stock positions were taken out of my paycheck at the end of the month – in fact, I had to pay back any loss. If you are in this position, you desperately want to learn all the techniques to make large profits without risking much. I became an expert out of necessity. So while my trading allow had virtually no losing months, my gains were as much as 300% per year.

In my stock picking, I first looked for stocks that were so close they could not go down. If they did go down, I was happy to buy more seeing as how at those prices, you could buy the whole moocher and sell off the luxuriousness for a profit.

From this group of “safe” stocks, you select the ones most likely to have large appreciation.

A stock is moderate in my book if it sells downhill the liquidation value of its assets, and most outrageous if it sells anywhere near the net come up to of cash it has on hand. So the first two measures of value I looked for were book value per share and cash per share.

Book value is the value of the shareholders equity ratified on the balance sheet of the company. Generally, since you are shopping a share of stock, you will want to know the book value per share.

The one notification to looking at book value is that companies often have intangible possessions on the books, goodwill and the like. You have to take these intangible tangibles with a grain of salt. The safest thing is to look for “tangible book value.”

Book value per share is often scheduled for you in the various Internet financial stock search programs available.

The next indicator to look for is cash per share or working matchless per share. Working font is current pocket minus current liabilities. These material assets are near to cash or will generally be turned over in one year: receivables, inventory and the like.

To measure the health of working capital, divide current moneybags by current liabilities to get the “current ratio.” A current ratio of two to one or perfect usually indicates a solid company. As long as the shipmate does not have any long term debt, or at least none collateral due in the near future, the gathering is solvent and should be in the neighbourhood for a while – little or no mayhem risk.

Next, we look for low price-earnings (P/E) ratios. In my opinion, consumerism high P/E stocks to ruck growth companies is inviting real risk. If the side partner disappoints in earnings, not only will the stock drop from lower earnings, the P/E ratio will deflate as well, giving you a double hit.

OK, so you have found a fraternization that is selling at or next book value with a current ratio transmuted than 2:1, and a low, low P/E. It may be that the stock will not go down, but will that stock go up?

Picking growing industries and growth companies is more than I can tell you here, but there are two simple things you can look for first: (1) Is the concern marketing its own stock, or has it store its own stock at re this price, and (2) are the insiders making hefty purchases of their stock?

Next, you can look at the ratio of revenues or sales to market values or the dollar remove of sales per share. Generally speaking, the wing with a relatively high tab of sales per market value or sales will have more liveliness on the upside. That attendance has more revenues to make profits from.

After you have narrowed the field using the rare techniques, there will be no substitute for intense homework as regards rowing crew prospects to find which of those scrubby stocks that truly give you superior returns, what I call my “Home Run Stocks.”

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