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Strategies & Market Trends : Due Diligence - How to Investigate a Stock
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To: Patricia Trinchero who wrote (11)3/30/1999 3:00:00 AM
From: EL KABONG!!!  Read Replies (1) of 752
 
Patricia,

Maybe a highly experienced investor/trader can post the first 5 things he considers when investing in a particular company.

I am a long term, buy-and-hold type of investor, not a daytrader and not a short term trader. These suggestions are for NASDAQ, NYSE or AMEX, not the OTC-BB or worse...

The five most important things I look at:

1) Fundamentals (especially the bottom line: profitability/EPS)
2) P/E ratios (in particular current P to past 12 months E and current P to projected next 12 months E)
3) Rates of EPS Growth/Sales Growth and Growth to P/E ratio (using the above P/Es)
4) Relative P/E ratio (how expensive is the stock today compared to its' historical average expense)
5) Management analysis

Also very important:

6) Current price trends of the individual stock, the stock's particular industry (competitors), the stock's particular sector and the market trend in general.
7) 52 week Hi/Lo prices (especially how close the current price is to a Hi or a Lo)
8) Return on Investment/Total Yield (includes dividends and capital gains)
9) Upside price potential versus downside price potential
10) Opinions of other investors (chat threads, analysts, news media, etc.) It is their collective opinions that will ultimately determine the direction of the stock's price.

For OTC-BB stocks:

1) Management
2) Management
3) Management
4) Management
5) Management

The least important factor in an OTC-BB stock is the product or service offered. Remember, if the product is particularly good or the service is unique or something like that, the bigger companies will either buy out the little guy or trample him with competition. Almost no exceptions...

KJC
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