This can be specialized in individuals which spend money on individual stocks. I wants to share with you the ways I have tried personally in the past to choose stocks i have found to get consistently profitable in actual trading. I prefer to make use of a blend of fundamental and technical analysis for choosing stocks. My experience indicates that successful stock selection involves two steps:

1. Select a share while using 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 higher than the 100-Day EMA

This two-step process increases the odds that this stock you select will be profitable. It even offers a transmission to offer options which has not performed as expected if it’s 50-Day EMA drops below its 100-Day EMA. It can be another useful way for selecting stocks for covered call writing, yet another kind of strategy.

Fundamental Analysis

Fundamental analysis is the study of financial data including earnings, dividends and funds flow, which influence the pricing of securities. I use fundamental analysis to help select securities for future price appreciation. Over the years I have tried personally many means of measuring a company’s rate of growth so that they can predict its stock’s future price performance. I used methods including earnings growth and return on equity. I have found these methods aren’t always reliable or predictive.

Earning Growth
By way of example, corporate net income is subject to vague bookkeeping practices including depreciation, income, inventory adjustment and reserves. These are subject to interpretation by accountants. Today more than ever, corporations they are under increasing pressure to get over analyst’s earnings estimates which ends up in more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their own balance sheet for such things as failed mergers or acquisitions, restructuring, unprofitable divisions, failed developing the site, etc. Many times these write-offs aren’t reflected as being a continue earnings growth but instead make an appearance as being a footnote over a financial report. These “one time” write-offs occur with increased frequency than you may expect. Many businesses that make up the Dow Jones Industrial Average have got such write-offs.

Return on Equity
Another popular indicator, which I have found 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 certainly maximizing shareholder value (the better the ROE the higher).

Recognise the business is a bit more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%

The answer then is Merrill Lynch by any measure. But Coca-Cola has a better ROE. How is possible?

Return on equity is calculated by dividing a company’s net income by stockholder’s equity. Coca-Cola can be so over valued that its stockholder’s equity is only corresponding to about 5% with the total monatary amount with the company. The stockholder equity can be so small that just about anywhere of net income will create a favorable ROE.

Merrill Lynch on the other hand, has stockholder’s equity corresponding to 42% with the monatary amount with the company as well as a greater net income figure to produce a comparable ROE. My point is ROE does not compare apples to apples then isn’t a good relative indicator in comparing company performance.
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