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How To Pick A Company To Invest In
Having picked the industry in which you are interested, you should put even more care into picking a company in that industry. After all, if you pick the black sheep of an industry you're no better off than you would be to pick the best company in a less spectacular field. What do you look for? Again the answer is earnings or the promise of earnings. And here you have all kinds of help. There are analyses available for practically every company listed on the New York Stock Exchange and most of those listed on the American Exchange and the other exchanges:Some of these are completely up to date; seldom is one very many months old. The research departments of brokerage houses put them out. Mostly they can be had for the asking and the brokerage houses often feature them in their advertising when they think they have one in which you will be particularly interested. They hope to impress you and in this way get your account. There are also lists of recommended stocks put out both by brokerage firms and by security advisory services. The advisory service recommendations are for their subscribers only. However, here again they are often used as a come-on to get you to subscribe and are offered with a two-week or one-month trial subscription which the service hopes will make a full-time subscriber of you. The better the market as a whole believes a company's earnings look for the future, and the more earnings the company is in the habit of plowing back into the business, the higher the multiple the market gives it. Sometimes the multiple is bid up out of all proportion to the value of the stock, just on promise alone. I've seen multiples of better than 100-1. Usually in such cases some hint of earnings trouble, an event, a rumor, starts the selling. Soon it becomes a rout and the stock tumbles to a more realistic P/E multiple, with a lot of people hurt in the tumble. Now and then the earnings promise materializes and the stock stays high in price. Stocks that command a high P/E ratio --that remain high in price so that the P/E ratio stays very high--are called glamour stocks or go-go stocks. There is great danger in owning them because the very high P/E ratio is based on promises of future good things to come and not actual right-now earnings. Often with the best ones the terrific earnings growth arrives on schedule (witness IBM), but sometimes it doesn't. People suddenly realize that they are sitting around holding promises instead of earnings and then it's Katie bar the door. Article Directory: http://www.articledashboard.com Learn more about Easy Feet and the Garry Vac programs today. |
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