Your Questions About How To Pick Stocks

Donna asks…

Good books to expand knowledge about markets and company analysis?

Hey guys im looking for any good books which might expand my knowledge of the markets and in company analysis. I dont want any stupid books with designed ‘methods’ to pick stocks, but rather general books from which you can learn something that you can devise into your own strategy.
Thanks.

John answers:

Book Title : Marketing Management
Author : Philip Kotler

1. This book have excellent resource for the marketing professional.
2. Great case studies, easy to understand context and a wealth of information.

Really this is a great Book .

Book Cover :-

Lizzie asks…

Is it ok to invest with a friend in a partership account if we signed a partership agreement together?

My friend and I plan on picking stocks together and having a partnership account.
It’s an investment club with just us two.

John answers:

I wouldn’t recommend doing business with friends or family, personally. Even if you never had a disagreement, business ups and downs can strain relationships and when it’s personal, it’s tough not to take it personal.

Betty asks…

Is it ok to invest with a friend by forming a general partnership and getting a partnership account together?

We plan on picking stocks together.

John answers:

Once you get involved with a friend, whether it’s business or personal, something always goes wrong and all you’ll have left is ill feelings towards each other.

Robert asks…

Which stocks are expected to rise in the next 3 weeks?

I’m doing a extra credit project in class where I need to pick 3 stocks. The project is only 3 weeks long so I was wondering what stocks are suppose to rise within 3 weeks.

John answers:

You’re going to “pick 3 stocks” according to what criteria?

Not many stocks go against the major market averages, like the Dow or S&P, or in general, the market. Whatever the market is doing, that’s what stocks are doing.

For someone to answer your question, they would be giving you their opinion of market direction and timing, which is almost useless since nobody can predict the future. The question becomes impossible for anyone but a psychic.

In reality, the markets are falling, and have been since October. This is an observable fact, not opinion. In fact the markets have fallen so hard the last few market days, they are oversold and overdue for a bounce. But I doubt this bounce in stocks is going to last 3 weeks, because the decline is not yet over. I will be selling short stocks into the rally next week. Or it could continue to decline (we’re back to the opinion part where nobody knows).

The point I’m trying to make is that the trend is DOWN in the markets, probably for some time to come, and it’s not a good time to be buying stocks (since you’re asking a timing question, rather than an investor question).

Use a chart of the Dow (daily, not intraday) for market direction, shown here:
http://finance.yahoo.com/echarts?s=^DJI+Interactive#symbol=^dji;range=ytd;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined;

Make sure you switch to a YTD or 1yr chart. Mentally draw an uptrend line from the June 4th low, and you’ll see that the Dow uptrend has been broken, and the trend is now DOWN.

I don’t know if you can do this for your project, but the best bet would probably be to short the market, not buy stocks (long). You don’t want to bet against the trend. That trend is also confirmed by a topping pattern in all of the major market indices.

The only strong stocks I’ve seen in this down market is Ruger and Smith & Wesson, both are gun manufacturers. Many people seem to think Obummer is going to legislate our guns and ammo away, so better buy while you can.

My recommendation would be to trade an ETF, rather than stocks. But if you want to trade stocks, the leaders on the upside will be the leaders on the downside, which will be energy stocks, technology and financial/banks.

If you want to short the whole market with an ETF you can sell short the Nasdaq or S&P 500 ETF’s, symbols QQQQ (Cubes), and SPY (Spyders), respectively. Or you can buy long an ETF lide SDS that is ultrashort the market (2X bear).

What you want for big movement in a short time span are high beta stocks. These are stocks that move more than others, and more than the market in general. But they can also cause huge losses, so you’re either a heel or a hero by choosing these.

If you are supposed to do this by fundamentals, rather than the technicals given, then this entire post is useless. So making us guess restricts the answers you’re going to get.

Jenny asks…

What stocks should I buy/short sell to win a stock market simulation game?

I need some help picking stocks to buy or short sell

John answers:

If you’re a rookie in investing or stocks, go to

www.finance.yahoo.com.

Open up a portfolio without using real money. You can give yourself as much or as little money to try out the market. The stocks you want to focus on is consumer staples, consumer discretionary, and healthcare. These are DEFENSIVE stocks that will survive through good and bad times. Most of my positions are in these stocks. Some names include 3M, Procter & Gamble, Kimberly Clark, Exxon Mobil, Walmart, Costco. Everybody’s got to eat and wipe their butts regardless of the state of economy. Many of these companies survived through the Great Depression.

That’s the benefits. You can sleep at night knowing your money is doing well. There are NO guarantees that you won’t lose money. It’s just that these stocks are the best. They pay good dividends too.

Then once you’re comfortable and test the waters of the market, you can finally put some real money in. Go to Scottrade.com. They’re excellent for beginners.

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