How to select a good stock
Selecting a good stock has always being a big problem to new
investors, even seasoned marketers find it challenging to select a profitable
stock. With the numerous companies
quoted in the stock market it is wise to know which company to invest in. It is not wise to buy a stock from a company
because you are fond of it; you only buy from a company after a careful
research.
Below is what you should keep in mind before buying any stock
from a company, to make a viable investment that will keep you smiling all the
time.
Quarterly result. Quarterly result is the report on the
financial statement of firm for a period of three month, a good quarterly
result that hit above analyst’s estimate means the company is performing
wonderfully and this automatically shut up the stock price and picking a stock
from this company is profitable. While a disappointing quarterly result will reduce the value of the stocks , quarterly
result are compared with the previous year’s
performance of a stock, a
significant growth means that a increase in stock performance well while a
slight growth means poor stock performance.
The year is divided
into 12 calendar month , with up to four quarters, if a company’s financial
year start from January it first quarter
will start from February, march, and April, and the 2nd , 3rd and 4th quarters start from may, august, November
respectively. factors affecting sock prices
if a company perform
in the first quarter very well, wait to see its second quarter ,before buying,
if it is good then go and buy . If a company perform well in the first, second,
and third quarters very well then it will the most likely, perform better in
the fourth quarter, but if a company
perform badly in the first quarter it will likely recover in the second quarter
therefore wait to see its third quarter before buying.
Also check the
financial statement of the company for the past years to ensure that its
current profits are from re-occurring activities and not from one-time
activities like sale of a real estate or bank loan.
Dividends bonus:
you can know if a company give dividends to its shareholders from it 3rd
quarters result. You can get this information from a stock broker or the
company’s financial publication. Some companies do not give dividends bonus,
this is why many investors consider this
before picking stocks. see our article on stock exchange
From the third
quarter report .you see the company result of earnings, tax and profits that
come before the announcement of the final result. If the company declares a
dividend bonus last year it may most likely not declare it till after a year or
two. Also a company that already has billions of shares capital may find more
difficult than a company with less share capital volume.
Market capitalization: it refer to the total amount of share
capital the company has at its disposal from all the shares its investors
bought. Companies are of two types large capitalization company and small
capitalization company, this is very
important to an investor because a company with
10 to 20 billion share
capitalization will have to get
large supply and demand because of large volume, it need to make enough profits to satisfy all it numerous
shareholders and therefore it stock value hardly rise, it may not want to declare dividend bonus in
order not overcrowd its already large volume. The demand for the stock
therefore falls and because investors won’t patronize stocks without dividends
bonuses. . While a company with
manageable stock volume need only small volumes of spellings to make profit and
affect its stock value. This stock has fewer shareholders to satisfy and
therefore the chance of giving out dividend bonus will be high.
Other factors to consider are earning per share, is the one
of most important indicator of the
profitability of an investment, to the
profit made per share, a compare higher earning per share tells you that it can
pay higher dividends compared to a company with low earning per share,.
Also know when the financial year of firms and institutional
sponsorships is. see our articles on private placement
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