How to analyze stocks?

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4th Dec 2009 by JonB

There is no one answer tho this question. Many people have made and lost fortunes using a variety of methods of stock analysis. The most common form of analysis is fundamental analysis. This includes looking at things like growth, cash flow, earnings, balance sheets, and sector growth. I tis my opinion that fundamental analysis is inferior to technical analysis, especially for the retail investor. The fact is that the market isn't moved by fundamentals. It isn't moved by news, earnings or economies- it's moved by supply and demand. In other words, it's moved by people. One can nail the fundamental analysis all they want, if the people don't buy and demand doesn't increase, price isn't going anywhere and you won't make a dime. That is why I suggest studying the supply and demand of a stock and where they may increase and decrease respectively. If you get that right, you are guaranteed to be in the green.

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17th Nov 2009 by Gary

There are as many ways to analyze stocks as there are ideas out there. I think the most important and valuable way for investors with a long term outlook is that the stock or sector the stock is in has a proven track record. Anything that isn't able to be analyzed is just a guess, and with a guess comes high risk. So the first step is to have a long enough time of being in business for a business to be analyzed in the first place. From there, you want to look at the viability of the sector the company does business in, and what its long term prospects are. No matter how good a company is, if it isn't in a growing sector, there's very little chance of solid growth going forward. Finally, look at the competitive advantage the company offeres, and how difficult it would be for a competitor to dent their market share. These are more important than any type of accounting figures, which can be played and made to say almost anything the company wants, and some accounting rules allow the business to be presented in a much better light than it really is in. So if you follow the rules mentioned above, you can be sure that the long-term prospects of the stock look good.

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10th Nov 2009 In Stocks 2 Answers | 4067 Views
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