Your Questions About How To Pick Stocks

Ruth asks…

How to pick good stocks (shares) from secondary market?

John answers:

By talking to a financial adviser. It’s true, you have to pay a commission, but generally speaking they could give you a better call, and hence the returns would be better.

James asks…

How to pick undervalued stocks at stock exchanges?

John answers:

The classical fundamental analysis approach is to compare the various ratios of similar stocks and declare the one with the “worst” ratios undervalued. So if stock A has a price/earnings ratio of 10 and stock B has a price/earnings ratio of 15 and their prospects are equally good, then a fundamental analyst might declare stock A “undervalued”. If the stock price then goes up, the analyst is a genius. But if they both go down, they were both obviously “overvalued”. A few people can play this game successfully, but I think there’s a fatal flaw to this approach that makes it very difficult for an amateur to play. This approach assumes that the market is stupid, and an individual can outsmart it. I would argue that the market is rarely stupid, it’s just overreactive and overemotional. The only time a stock is reliably “undervalued” is when transitory or irrelevant news induces overreactive selling. There are periods when stocks reporting earnings a penny below expectations are routinely hammered 10 to 25 per cent. If the company isn’t totally negative on the future, there is usually a bounceback as bargain hunters come in. My favorite “undervaluation” moment is when an analyst downgrades a stock and knocks it down 5-10 per cent. Most analysts aren’t any smarter than the market. If the company is doing well and the stock is in a decent uptrend, it will recover in a few hours or days.

This disturbs many people, but the truth is prices are driven by emotion and psychology, not financial ratios. An ordinary person can take advantage of this fact when emotion gets out of hand. I think this is a more reasonable goal than trying to be the next Warren Buffett in one’s spare time.

Sharon asks…

INTRA DAY SOFTWARE OR HOW TO PICK INTRADAY STOCKS?

I am a intraday trader, can any one help me is there any free software by which i can pick up the stock moving up or moving down or a site during live market hours and c the stock prices live software free.

John answers:

There are no free realtime solutions that I would use to put my money at risk. However if you’re just interested in testing the water and checking out the market then you can consider these two:

http://www.nasdaq.com/aspx/unusualvolume.aspx
http://www.prophet.net/scans/index.jsp

Also your broker should have at least some lists such as Most Active, Highest % Gainers/Losers.

Lizzie asks…

I would like to be hired as a stock option advisor how can i do this?

I have no college degree so I believe this will be impossible. Someone please help. I can pick stocks going up and down better than most professional who work on wall street.

John answers:

You can always become a stock broker, and try to build a client base.
Firms are always looking for brokers, and you don’t need to have a college education.
You’ll just have to get your resume out on the street and give it a try.

During my many years in the industry I’ve interviewed many prospective employees, who claimed they were better than most professional, but in reality, I’d take the professional advisor any day and being from the operational world, I don’t like advisors.

If you are that good, why aren’t you trading for yourself rather than worrying about getting a job.
Option traders, can easily make 10,000 a month using limited capital.

I’m not telling you what you want to hear, and maybe I’m not being too polite in my response, but it is honest and it’s based on years of experience. Go out there and prove to yourself that you can make a very decent living trading.

Donald asks…

project for stocks/mutual funds? HELP.?

i am doing a project for math & i need to pick stocks/mutual funds. i have no idea how to do this. could someone give me two good ones? ASAP , please.
-thankyou 🙂

John answers:

KO and WMT are two good companies. Very good in fact. Also MCD

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