Your Questions About How To Pick Stocks

Mark asks…

What types of businesses can I start up with a Marketing degree?

I am currently majoring in marketing. I inherited a lot of cash and I am investing it so when I am ready to establish my own business, I have a good capital. I was thinking of opening up an advertising agency because they make good revenue also with market research skills would it be beneficial in picking out stocks because with the market research I am more likely to know what type of companies will make money.

John answers:

Good to hear that you are a marketing graduate. Here is what I can suggest to you. Internet marketing is very in demand today and I supposed you already know more about it. For more information visit the website http://bit.ly/lzvs08-ya and there you will have a free membership and you are ready to earn income after that.

Sandra asks…

Is there a site which allows easy calculation of stock correlations?

When creating a balanced portfolio it seems very important to pick stocks (or bonds, etc.) which are uncorrelated as much as possible. I know the formula to calculate stock correlation is fairly straightforward, but is there a site (including pay sites) which allows easy calculation of stock correlations, and also allows correlation as an input to a stock screener?

John answers:

I have a simple alpha-beta calculator on my Web site that also computes correlation of a stock or a fund with S&P 500:

http://www.ncbase.com/ab/

But correlation is only one of many measures of risk…

Linda asks…

Is this career title asset or portfolio management or something else?

Lets say a person picks stocks for several people’s portfolio’s based on those people’s risk for trading/investing in stocks and various derivatives whether they’re quick swing trader to position trades to less risky more income driven stocks for very long term investment. In the world of investment industry to do this professionally is this considered asset or portfolio management or does this position have a different title?

John answers:

Financial Adviser or Financial Planner
Other good options in finances are:
Broker
Investment Banker
Accountant and CPA
Mutual Fund Manager
etc, etc…

Susan asks…

What is P/E? When picking stocks, do we look for low p/e or high p/e?

I know what P/E stands for Price-Earnings Ratio, But i dont clearly get it,and how its used for picking stocks.

John answers:

A single company’s PE doesn’t mean much by iteself.
You have to compare it other companies in the same industry.

Take Microsoft for example which has a PE of 12.84.
Http://finance.yahoo.com/q?s=msft

MSFT is in the Tech Sector and Application Software Industry.
You can see that here:
http://finance.yahoo.com/q/pr?s=MSFT+Profile

At the above link, when you click on Technology, you’ll see that the Tech Sector has a PE of 19.34 and when you click on Application Software, you’ll see that the industry has a PE of 20.5.

As you said, PE is the Price-Earnings ratio.
MSFT has a lower PE than the Sector and Industry that it’s a part of. A lower PE means that it’s cheap compared to it’s industry and sector average.
This should tell you that compared to it’s sector and industry average, MSFT has a lower price.

Another way to look at it:
Company A is $1/share and at last Quarter had Earnings of $1 – this company has a PE of $1/$1
which is 1.

Company B is $2/share and also had last Q earnings of $1 – this company has a PE of $2/$1.
Which is 2

Company A is a better bargain.

PE should be compared to the industry and sector as well as other companies.
You can also look at historical PE and see the bargain level of a company over time.

Remember that just because a company is a “bargain” does not mean it’s a good buy.

Steven asks…

What kind of research are you suppose to do when picking stocks?

What information on a stock am i suppose to be looking for?

John answers:

There are two types of research/analysis…..fundamentals or technical analysis.

Fundamentals analysis is the sifting through of the balance sheets and earnings data and even having to form a views as to the quality of the products or services provided and whether demand is going to increase or decrease.

Technical analysis uses the stock charts to come to a view of whether it is likely to rise or fall in price irrespective of perceived ‘value’

Technical analysis is by far the most useful means of analysis for private investors and traders.

There are many different technical analysis methods and you can learn the basics of reading charts through to more advanced technical analysis here…..

Http://www.tradersdaytrading.com

This is another useful resource where you can get a whole bunch of free stuff including basics tutorials, ebooks, videos etc

http://www.tradersdaytrading.com/elliott-wave-tutorial

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