Your Questions About How To Pick Stocks

James asks…

Whats the best way to get involved in the stock market?

I want to buy a few stocks – where do I go? – Do I need a broker or a financial adviser?

John answers:

Start with mutual funds. I suggest reading The Zacks Method and How to Make Money in Stocks. These books will teach you how to pick stocks on your own. I dont recommend following advice from magazines. Their picks tend to be old news by the time the magaine is printed.

Donald asks…

What do you do while picking a stock?

Do you prefer fundamental analysis / technical analysis / advice from experts / random stocks? And why?

I am trying to decide which technique to use. So please tell me the pros and cons of your methord too.
Thanks a bunch! 🙂

John answers:

None of the above. I review the regulatory information that is required by governmental agencies and stock exchanges. This will tell you the really important stuff – what sector the company is competing in, what the company’s business operations are like, what it is attempting to do and it allows you to do an apples to apples comparison of competitors – as everyone is required to provide the same information in the same (or similar) format.

Fundamental and technical analysis is all based on past performance, and there is a reason that every bit of company/stock information contains the caveat “past performance does not indicate future performance”. While it can show that a business strategy has been and would most likely be successful in the future, you have to do more than look at fundamentals and technical data to determine if the data reflects business strategy or a one off quirk – such as the pet rock.

Advice from experts, as long as you pay for that advice, is fairly reliable. If you are going off of unsolicited and unpaid advice from a purported “expert”, then you are going to get burned as that “expert” is there to line his pockets, not yours. He is going to “advise” you to buy what will make him the most money regardless of how suitable an investment is for you.

Picking random stocks is about the same as going to a casino and plunking down your money on the roulette table. It is pure blind gambling.

Maria asks…

How can I conduct a search for all stocks with an “OutPerform” rating?

I want to see stocks that have been given that rating and I don’t know how to cull through it all- It seems there must be a way to do a search by say, top 100 stocks set to outperform?

I am not a financial expert (imagine that!) and I don’t have access to Bloomberg or any proprietary stuff so I hope there’s a way.


John answers:

Well this sounds good in theory, it’s not very practical. However if your trying to find some stocks to look at, you should pick some stocks in companies you are familiar with (Coke, Nike, etc.) because you understand what they do to make money. Then you can compare them against the same companies and then make your own ‘outperform’ rating for your stocks.

Typically outperform either compares a stock against it’s industry peers or the overall market/exchange depending on the benchmark and says it’s doing better. However it doesn’t tell you why. In some cases it’s due to acquistions or external influences that may be one-time in nature. Other reasons are due to a change in business fundamentals. This can also relate to underperform measuring sticks.

So its a good ruler, but it’s not the rule. — I hope that summary makes sense.

One of the things I did to reduce the overwhelming nature of trying to find a gem in a bunch of stones is to pick one stock I knew, and then started doing searches related to it and checking out other companies in the same markets/industries. From here it will just grow and grow.

Typically this type of information can be gained from investment newsletters and magazines also possibly from your brokerage firm. Even your bank will have this type of data available (to some degree). So to get the best data, you may have to seek out some of that ‘proprietary stuff’ 🙂

Sharon asks…

How do you determine what stocks or other investments you invest in?

With thousands of companies and different stocks and does one determine what is best for them for long and short term investments.

John answers:

I try to pick something I know and what looks like an attractive price per share. I generally pick wrong most of the time anyway though.

Richard asks…

Where can I look at stock changes?

Doing some college assignment where we’re supposed to pick a company stock with a closing date tomorrow and see if it changes by tuesday. Whoever gets the highest points gets the highest grade T_T where can I look up stock things and any suggestions on what to choose :P?

John answers:

Yahoo Finance is a good place to find them.

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