This really is dedicated to individuals who wish to purchase individual stocks. I has shared along the techniques I have tried personally over the years to pick stocks that we have realized to be consistently profitable in actual trading. I want to utilize a mix of fundamental and technical analysis for selecting stocks. My experience has shown that successful stock selection involves two steps:

1. Select a stock while using fundamental analysis presented then
2. Confirm how the stock is definitely an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being across the 100-Day EMA

This two-step process raises the odds how the stock you end up picking will be profitable. It offers an indication to market options which has not performed as you expected if it’s 50-Day EMA drops below its 100-Day EMA. It is another useful way of selecting stocks for covered call writing, a different type of strategy.

Fundamental Analysis

Fundamental analysis could be the study of economic data for example earnings, dividends and funds flow, which influence the pricing of securities. I use fundamental analysis to aid select securities for future price appreciation. Over the years I have tried personally many strategies to measuring a company’s growth rate so that they can predict its stock’s future price performance. I manipulate methods for example earnings growth and return on equity. I have realized these methods usually are not always reliable or predictive.

Earning Growth
As an example, corporate net profits are at the mercy of vague bookkeeping practices for example depreciation, income, inventory adjustment and reserves. These are all at the mercy of interpretation by accountants. Today more than ever before, corporations are under increasing pressure to conquer analyst’s earnings estimates which ends up in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their balance sheet for such things as failed mergers or acquisitions, restructuring, unprofitable divisions, failed product, etc. Many times these write-offs usually are not reflected as being a continue earnings growth but instead show up as being a footnote on the financial report. These “one time” write-offs occur with an increase of frequency than you could expect. Many companies that from the Dow Jones Industrial Average have such write-offs.

Return on Equity
One other popular indicator, which has been found just isn’t necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a high return on equity with successful corporate management that is maximizing shareholder value (the higher the ROE the better).

Which company is much more successful?
Coca-Cola (KO) which has a Return on Equity of 46% or
Merrill Lynch (MER) which has a Return on Equity of 18%

The solution is Merrill Lynch by measure. But Coca-Cola features a much higher ROE. How is this possible?

Return on equity is calculated by dividing a company’s post tax profit by stockholder’s equity. Coca-Cola is really over valued that it is stockholder’s equity is only corresponding to about 5% from the total monatary amount from the company. The stockholder equity is really small that just about any amount of post tax profit will create a favorable ROE.

Merrill Lynch conversely, has stockholder’s equity corresponding to 42% from the monatary amount from the company and needs a greater post tax profit figure to produce a comparable ROE. My point is always that ROE does not compare apples to apples so therefore isn’t a good relative indicator in comparing company performance.
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