This can be committed to individuals who want to purchase individual stocks. I wants to share along with you the strategy I have tried personally over the years to select stocks that we are finding to become consistently profitable in actual trading. I love to work with a mix of fundamental and technical analysis for choosing stocks. My experience has shown that successful stock selection involves two steps:

1. Select a stock using the fundamental analysis presented then
2. Confirm that this stock can be an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being above the 100-Day EMA

This two-step process increases the odds that this stock you decide on will likely be profitable. It even offers a sign to market ETFs which has not performed needlessly to say if it’s 50-Day EMA drops below its 100-Day EMA. It is another useful way for selecting stocks for covered call writing, a different type of strategy.

Fundamental Analysis

Fundamental analysis may be the study of monetary data including earnings, dividends and money flow, which influence the pricing of securities. I use fundamental analysis to assist select securities for future price appreciation. Over many years I have tried personally many options for measuring a company’s growth rate so as to predict its stock’s future price performance. I purchased methods including earnings growth and return on equity. I are finding that these methods usually are not always reliable or predictive.

Earning Growth
By way of example, corporate net profits are subject to vague bookkeeping practices including depreciation, cash flow, inventory adjustment and reserves. These are typical subject to interpretation by accountants. Today as part of your, corporations they are under increasing pressure to overpower analyst’s earnings estimates which leads to more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their own balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed website, etc. Many times these write-offs usually are not reflected being a drag on earnings growth but alternatively show up being a footnote on the financial report. These “one time” write-offs occur with more frequency than you might expect. Many firms that constitute the Dow Jones Industrial Average have taken such write-offs.

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

Recognise the business is a lot 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 any measure. But Coca-Cola carries a much higher ROE. How is that this possible?

Return on equity is calculated by dividing a company’s post tax profit by stockholder’s equity. Coca-Cola can be so over valued that its stockholder’s equity is merely add up to about 5% in the total market value in the company. The stockholder equity can be so small that just about anywhere of post tax profit will produce a favorable ROE.

Merrill Lynch conversely, has stockholder’s equity add up to 42% in the market value in the company as well as a greater post tax profit figure to create a comparable ROE. My point is always that ROE doesn’t compare apples to apples therefore is very little good relative indicator in comparing company performance.
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