Stock Picking Methods

Picking the right kind of stocks is imperative to get the desired returns in the stock market. However, this is an art which is known to very few investors. There are some stock picking methods and tips which can help you pick right stocks at the right time.

Ideal Stock Picking Methods

Pay Attention to the Fundamentals
Paying attention of the fundamental of stocks before buying them is the first suggestion to all the investors. This is because only fundamentally strong companies have the capacity to deal with high competition and changing market trends. Companies which post good financial results over the years, have a good shareholding pattern, enough assets, less debt and follow business ethics should be on your radar as a good investor.

Note the Valuations of the Stock
It is important to buy stocks of good companies when they are available at attractive valuations. So, you can make use of corrections in such stocks to accumulate them at lower levels. Averaging and bring down your total price is a good strategy in well-known blue chip stocks.

Think About the Business Model
One of the best stock picking methods is to think of the business model and future growth for the company. To earn profits, consistent growth is necessary and only high profits can guarantee an appreciation in the share price and attractive dividends. You should think whether the company will be able to perform well in the years to come considering the competition from its peers. Also think whether the demand for its products would remain intact in the ever-changing market.

Check the Management of the Company
A company is not a machine which functions on its own - it has to be run by efficient people. So, are the people running the company in which you wish to invest good enough to achieve the set goals and targets? What is their track record? Ask yourself these questions and do not invest until you get satisfactory answers for the same.

Check the Investor Interest in the Stock
A stock price can go up only if it is bought by many investors and hence checking whether the stock would be able to gather a lot of investor interest in the near future is very important for any investor. You will be able to identify this only after a sufficient years of experience of capital markets.

Study the Stock Technical Charts
Technical charts will convey how strong the stock is technically. There are many companies which are fundamentally good but have given less returns and hence you should choose among the fast mover stocks which have strong charts and really well.

Try to Visualize Future Earning
We should try to visualize the future earnings before buying the shares of a company. Try to identify the factors which will positively and negatively affect the future earnings and then take an appropriate decision in this regard.

Stock picking methods for short-term, medium term and long-term investments would be different from each other. Therefore, you should first decide what kind of investor you are before you think of the ways of investing. The suggestions in this article will help you understand things in a better way. All the best for the trades!

DISCLAIMER: This article is just for reference purposes and does not recommend any stock market transactions.