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 unchangingly true.

When I was a professional stock trader, I made most of my profits from subtlety 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 mileage 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 second-rate they could not go down. If they did go down, I was happy to buy more being as how at those prices, you could buy the whole contingent and sell off the handsome fortune for a profit.

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

A stock is deplorable in my book if it sells the liquidation value of its assets, and most token if it sells anywhere near the net reckoning 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 passed on the account of the company. Generally, since you are sale a share of stock, you will want to know the book value per share.

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

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

The next indicator to look for is cash per share or working fundamental per share. Working beneficial is current unpaid accounts minus current liabilities. These net worth 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 unpaid accounts by current liabilities to get the “current ratio.” A current ratio of two to one or higher usually indicates a solid company. As long as the corps does not have any long term debt, or at least none flowing toward due in the near future, the classmate is solvent and should be hard by for a while – little or no bust risk.

Next, we look for low price-earnings (P/E) ratios. In my opinion, shopping high P/E stocks to shooting growth companies is inviting real risk. If the team-mate 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 participation that is selling at or downhill book value with a current ratio promote 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 troupe purchasing power its own stock, or has it its own stock at alongside 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 proportion of sales per share. Generally speaking, the squadron with a relatively high sense of sales per market value or sales will have more enterprise on the upside. That studio has more revenues to make profits from.

After you have narrowed the field using the item techniques, there will be no substitute for intense homework most file prospects to find which of those token stocks that truly give you superior returns, what I call my “Home Run Stocks.”

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