Your Questions About How To Pick Stocks

Jenny asks…

Best website for penny stock picks?

I know penny stocks are risky but I want to hear ppl who do penny stocks and want to know how you do yourself for some insight on this whole penny stock investment

John answers:

There is no form of reliable Penny Stock news. Information on penny stocks should always be suspect. They aren’t called “Story Stocks” for no reason!

The keys to be successful in Penny Stocks are;
1) Only trade highly liquid stocks. If your Penny Stock trades at $4 a share…. I’d like to make sure the average daily volume is over 600,000 shares. Obviously, the lower the price the more share volume you need to see. Don’t be victim to an easy purchase but hard to sell.

2) Determine the trend. Only trade the trend.

3) Be highly skilled at risk management. If you’re not….. You’re just gambling.

4) Use your brokers software to find stocks below $5 with high volume & higher than normal volume (plus any other criteria you think is important).

5) Be realistic with your stops & always honor them.

I trade penny stocks on a rare occasion. Mostly for fun. When I want to trade to make money I do stocks over $20….. Just easier & certainly as a whole…. Much more profitable (over the long haul).

Michael asks…

What are the best stocks to apply to?

I don’t know the first things about investing.
What types of products are generally the best to invest in?

How do professionals pick out the best stocks? What other questions shouls I be asking?

John answers:

I lost a lot of money in the stock market before I started studying the stocks that I invest in. Even good study does not mean you will always make money. If you are going to be an active investor, and willing to do your own research, start by getting a discount broker. I use Scottrade. They have good tools to help search through the stock market, and trades cost approx. $7 to buy and again to sell. If you do not have the cash right now, AOL, Yahoo, and other sites allow you to create portfolios where you can watch the market, so you know what you want to buy when the time is right.

The most important factor in picking a stock is the lemming factor. The more people who know about a stock, and are willing to buy the stock, the more likely the stock will rise in price. You must also guard yourself against the lemming effect, because it works twice as fast on the way down.

With that in mind I have one strict rule. The stocks I buy must be making a profit. I look at the P/E ratio first. The P/E ratio is the Price of one share of stock divided by the Earnings attributed to one share of stock. (Price/Earnings). If there is no P/E ratio, or a negative P/E ratio, the stock is losing money. I do not buy regardless of the hype. Low P/E ratios are best. If you look at the purchase of stock as if you could buy the entire company at current prices, the P/E ratio will tell you how many years it would take to pay back your investment from the profit from the company. P/E ratios are very common between 12 and 25. I have seen them as high as 100 or more, and currently there are some below 10. I recently purchased Ford Motor Company (Stock symbol F) at $13.40 per share. It is down to $13.09 now and has a P/E ratio of 6.29. Compared to General Motors(GM) at $29.76, and Honda Motors(HMC) at $40.29, both at no P/E ratio (Honda was affected significantly by the tsunami) and Toyota (TM) at $83.85 with a P/E ratio of 28.23, Ford is a bargain.

The P/E ratio also allows a quick comparison between stocks of differing price. Capital One Financial (COF) is currently at $48.50, but it too is cheap compared to it’s profits with a P/E ratio of 6.5. I am not invested in COF because of the higher cost per share.

Continue looking into the history of the profits. Sometimes the whole profit is from the winnings of a lawsuit, the sale of an asset, or recently from government bail outs. I do not like one time winners, and hate bail our recipients because you cannot count on continued profits. Also look to see if profits are increasing. That would be better than another company with the same P/E ration with profits decreasing.

After you have invested, keep current on what is happening with your stocks. If there is a drop in the profits, or some other problem, sell out. Many stocks will even continue to rise even after bad news, but I try to limit my risk and go to another stock that still meets my criteria. When your stocks are rising and get into the 12+ P/E ratio, start looking for another stock. It is best to ride a stock while it is rising. Stocks prices waver as they rise or fall, so do not be afraid of a drop if the stock is making money and still has a low P/E ratio.

I am not a professional, so I do not know what they do, but over the last 3 years I have averaged just under 20% annual return, and this includes some nasty set backs. There is no sure bet.

Also, you have to consider the tax consequences. I do my investing in our IRAs so we are not taxed on the gains as we trade.

James asks…

Where can I find a good video explaining the basics of stock trading concepts?


Can anyone recommend a good video that explains the fundamentals of various stock trading concepts? I’m not really looking for information on how to pick a winning stock, just an explanation of all the various trading options and how they can be used together. (for example using options to limit losses etc).
As well as an overview of common terminology and what do they mean. (example: stop order, limit order etc).

Thank you in advance for any advice.

John answers:

You may find following videos on stock market concepts useful:

Laura asks…

How do I go about choosing and installing a muffler on my 99 Accord?

I have a stock 99 honda accord coupe 4 cylinder. I want it just to have a more punchy sound without being overly loud in the cabin. I could drill holes but im looking for something done right! I just have no idea how to pick out a muffler for my vehicle. I am looking to increase mpg most importantly though. I maybe considering some sort of coldair intake as well. Or is all this pointless on a 4cyl automatic??

Thank you!!

John answers:

Well you made a poin with a stock moffler you get exaust restriction that means about 3 to 5 hp cold air intake its a good idea or just keep a stock air filter and remplace with a k&n that would save you gas, and use a lucas injector cleaner and remplace fuel filter (its cheap) whenever you do oil change . With the muffler go with something like trust it would be cheaper than any japan made muffler with that it will be like 12 hp max for 200 dlls or more

Chris asks…

How to know which stocks are increasing right now?

How to know which stocks are increasing right now and is likely to increase at least for the next 5 mins?

John answers:

U mean to ask stocks likely to increase in next 5 months???
Well…the energy stocks will surely go up……and particular stock suggestion in that sector depends on your investment
and in Infrastructure…GMR is a very good call it has got very good potential…i would suggest to hold it for atleast 3-4 months..
And bank stocks are also doing good……u can go for South Indian bank ..which is again good pick for mid term investment….
All these things that i have told u now are just suggestions based on my assumptions…and invest purely based upon your knowledge and thinking.
I wish u good luck….
Happy investing..!!!!!

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