Your Questions About How To Pick Stocks To Buy

Thomas asks…

What should you look for when looking at a company’s balance sheet?

If you go to Google.finance.com and pull out any company’s Financial there’s 3 categories: Balance sheet, cash flow, income statement. Which of these should you study the most? (income, revenue, amortization etc.) when trying to pick stocks? Appreciated.

John answers:

All three are certainly important. When looking at an income statement I want to see year over year of sales growth and net earnings growth. The two most important items to look at on a balance sheet are the short term assets (cash, receivables, inventory) and the long term debt. I prefer companies with no long term debt, because if you don’t have to pay off debt holders the likelihood of filing Chapter 11 is slim to none. As for Cash flow, I like to see if the company is buying back shares and reducing debts.

Helen asks…

What would be good pick ups to replace the stock pick ups on a Gretsch Electromatic Hollow Body?

I have a Gretsch Electromatic guitar with the stock pick ups still in. I would like to replace them with something that would get a warmer sound as opposed to the twang in the stock pick ups. Something more along the lines of jazz boxes and etc. Any suggestions?

John answers:

There’s an online shop based out of New Jersey that I’ve found that does many styles of pickups. They’re called GuitarFetish and you can find them at that dot com address.

They have several varieties of the Electromatic style pickups that are wound a bit hotter/warmer than the stock Gretsch models. Since they’re designed by an engineer here in the states, but manufactured overseas, they are actually pretty nicely priced. I’ve bought some pickups there for my Epiphone Dot.

If you have some extra money to spend for nice, handmade pickups that look the same as your stock models, the Gretsch management actually endorses a builder named TV Jones. His pickups are the real deal, but they also cost nearly $100 each.

Hope this helps.

Mandy asks…

How do you buy stock, and what would be a good company to invest in?

I want to buy stock, because I can’t think of anything else to buy. And I don’t know how, so I’ll need to know that. I have an idea what company I want to buy one from (Apple), but I need some more ideas. I was considering like one of the airlines, but I don’t know if that would be good or not.

John answers:

You should learn first how to invest (very important!!!) as it’s easy to pick good stocks. It’s much tougher to keep your profits if you don’t know what you’re doing.

That said, some good stocks you might try include BEN, RYAAY (if you like airlines), GS, and ICE to start. Some of my favorites.

Good luck!

David asks…

What are some good companies to invest in?

I have a project due in Economics on Wednesday. I have to pick three companies to buy stocks from, and I have no idea where to start.

So far, I’ve considered Apple and Wal Mart, but I have a bad feeling about Wal Mart. And pretty soon, people aren’t going to have any money to waste on iPods and computers. So, eh.

Any suggestions?

The “money” we make during this project is going to determine our final grade. Obviously I want to pick something good to invest in. >_>

John answers:

Do they have to be American or does it not matter?

If Canadian companies are ok:

Potash Corp. Of Sask. ( POT.TO) – 52 week high: $246 – Current Price: $77.

Potash is a key ingredient in fertilizer, glass and soap. The reason Potash is a good investment right now is mainly for it’s fertilizer usage. With the middle class demographic in China and India growing rapidly, there is more demand for better quality diet, which means they need more fertilizer to grow better quality foods. POT.TO has skyrocketed in the last year or so, but is suffering due to the economic slow down. Saskatchewan (where Potash Corp. Is based) is in the middle of an economic boom and is supposed to be the province that leads Canada through the upcoming ressession and beyond due it it’s abundance of natural resources like potash, oil, diamond mines, and uranium deposits.

Any of the Canadian banks. Canada’s financial system was recently listed as the stongest financial system in the world. All their stocks are beat up right now becuase many Canadians watch American programing and paint Canadian financials with the same struggling brush as the American financials.

Other good investments right now would be any of the ‘consumer staples’. Companies that will be around for ever and still sell whether it’s a ressession or economic boom. These brands would include Coca-Cola, Johnson & Johnson (personal hygeine products), Proctor & Gamble (personal hygeine products to board games). Another good investment would be General Electric. GE is a manufacturer of various different goods from medical equipment to engines for planes and trains to weapons to clock radios. One of the keys is the weapons and engines. As long as the US is fighting in the war, GE will be making money. When the soldier come home and need medical help, they will use GE medical equipment like MRI machines, etc. Warren Buffet (the worlds richest man and touted as the worlds greatest investor in history) recently bought up a ton of shares in the company. That alone should be a testiment to how great the company is to invest in.

About your picks:

Apple – I’m not so sure about them as well. Money is tightening up so high end items like the iphone will be an optional thing that people will not be buying. Also, with the new Blackberry Storm coming out, that will take a bit out of Apple’s sales as well (no pun intended :D). Depending on how the release of the Blackberry Storm goes, Reasearch in Motion (RIM) would be a better bet. RIM manufactures Blackberry’s. The Storm is supposed to be cheaper than the iPhone, so it shouldn’t price it’s self out of the ressession squeeze.

Wal-mart – I think that one might be ok to look at. I haven’t looked into their financials or anything, but from a logical point of view: When people are broke and money is tight, what do they buy? Cheap, low cost products. What does Wal-Mart sell? Cheap, low cost products. Wal-Mart has stayed pretty flat over the last couple years, but for the most part the economy was booming so people were re-financing their houses and living well. Now that money is tightening up, people will be looking for deals in everything they buy.

John asks…

How old do i need to be to buy stocks and start investment?

Im currently 17 years old now. My state’s age of majority is 18.
Can I buy stocks and make some investment? Is it legal?

John answers:

It is not legal for you to buy stocks yet nor have them in a brokerage account unless they were done together with your parents.

However I would strongly suggest that you spend this year (as you only have to wait one year) and save up as much money as you can. The commsions on stock purchases are usually higher if you buy less then 100 shares at a time. You are thinking the right things here, but it will be a lot cheaper if you wait until you have enough saved up to buy at least 100 Shares at a time.

Also, and I give this advice to anyone who is about to make their first investment. Pick out what you want to invest in and then go to a site like yahoo finance and make your own portfolio. Start with the fake money that this allows and begin researching and looking at the charts to try to get to know how the market affects the stock price.

When you turn 18 you will have saved enough money to invest at less cost and you will know what you are planning on buying inside and out. Finally you will have seen how your “fake” portfolio handled itself in a very trying time.

GOOD LUCK!!!!

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