Your Questions About How To Pick Stocks

Joseph asks…

how does the roi relate to buying stocks?

can you use just the roi to pick stocks?

John answers:

No- ROI stands for return on investment- that is the proportional growth of the money you invest in a company expressed as a percent of the original investment. Ex. If you invest 500 dollars and your investment becomes worth 750, then you have a %50 ROI- the 250 gain is %50 of 500 dollars. You can’t use this to pick stocks, just judge how well your pick was afterwards.

Use ROE and ROA for company metrics- ROE is Ret. On equity-the return the co has made on the stockholders investments- look for companies above %18 ROE , and ROA is return on asset- how much the co is returning on its property- Plant/materials/equipment etc. Look for ROA above 15- varies by sector though.

Mary asks…

How do you discover good foreign stocks?

Hello I am looking to understand and follow foreign stocks more, but does anyone know of a good website besides SmartMoney that can give a clear outline of foreign stocks without relaying the facts through charts and graphs.

I am basically looking for best stocks by each country. For example, I discovered this Russian stock,Mechel Open Joint Stock Company (MTL), two days ago and saw it make a 20 percent profit. It would be nice to find these things easier than stumbling across them by accident.
Can anyone say they know the top best foreign picked stocks by country? Or the best foreign stocks to pick overall?

John answers:

Pretty much my favorite site is Money Morning. They post every day, have a global outlook, and focus on specific geographic and investment areas throughout the year.

Lizzie asks…

What is EPS, Why do investors look at this when picking stocks?

I know EPS is earnings per share, but i don’t understand the concept and how its related to stocks.

John answers:

EPS is probably looked more at by analysts who follow the projected EPS number by the company and develop their own whisper number where Wall Street predicts EPS depending if company sandbags or under estimates or over estimates their forecasts. You can see huge drops or increases in share prices when companies EPS beats or under performs the EPS forecast.

Companies also use the EPS number for dividends mostly a percentage to derive the payout.

Jenny asks…

how do i pick penny share that r ready to take off?

can i have tips on how to pick stocks, tips on stock that u know about, especially uk ones -n please only give useful advice not cliched ladidah – im really only looking to hear from ppl who play/know the market not general blah blah advice – many thanks

John answers:

Sorry but the penny shares are a rip off.

Mandy asks…

Where can I learn all the smallest nuances of how warren buffett picks stocks,?

Where can I learn all the smallest nuances of how warren buffett picks stocks,?
and all the technicalities of analysing and filtering through balance sheets for relevant information? Actually, I have read many books on Buffett, but he hasn’t set out the exact tools and techniques that he uses for value investing, in detail. Where can I learn these tools and techniques in detail? I am willing to go anywhere to learn these techniques. Please suggest.

John answers:

Investing well is an art and not a science. Perhaps Warren Buffett doesn’t have exact tools and techniques for value investing. And that might be why he hasn’t mentioned them in his books. He probably uses his judgment a lot.

Relying on formulas and techniques is what the banking industry did until the present credit crisis. And we all know what happened to them as a result of that.

Formulas and the techniques can never be a good substitute for common-sense judgment.

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