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You must consider both fundamental information about the strength, quality and soundness of the company and its products and the technical side of how a stock is performing in the marketplace.
Fundamental analysis in the foundation you must have behind every stock you buy. This will determine the equality and superiority of the stock. It is how you separate the wheat from the chaff.
We have fund that a company’s profitability is one of the most important factors that affect the stock price. This means buying only stocks that show consistent earnings improvement, have increased sales and have preferably both strong profit margins and a high return on equity.
Earnings per share can be used as an indicator of growth and profitability.
Three out of four of the biggest winners were growth stocks, companies with annual earnings per share growth rates up and average of 30% or more for each of the past three years before they made their biggest price gains. Therefore, concentrate on stocks with annual earnings growth rates of 30% or more for the past three years.
This is one of the most significant rules.
Sales should either be accelerating in the last few waters or be up 25% or more from the same quarters one year earlier. Prefer to select companies that are #1 in their particular fields in terms of recent sales and earnings growth, profit margins and return on equity.
Return on equity (ROE) is an indicator of financial performance. It measures how efficient a company is with its money.
Most of the big winners in our study had ROE of 20% or more.
Technical analysis is the study of market moment, mainly with the use of charts. Chart analysis uses as stock’s price and volume movements as the leading indicators and allows you to check out the supply and demand for a stock.
You should use daily or weekly price charts with trading volume data. By using charts, you can graphically see if a stock is acting normal or abnormal and if it is right time to buy or sell, based on its own history.
The best institutional investors use both fundamental and technical analysis in their purchase decisions.
