Make Money In Stocks The Fundamental Way

A company worth investing must have earnings.  There are traders who try to beat the market trend. The market trend point to the general direction of the market.  Never try to fight the trend as it is your friend.   Just follow the trend and you will find that you will have much more success than fighting it. 

Now that the fundamentals are over I want to tell you a few things that will make you or anyone some money. A company worth investing in must have earnings. The company must earn a profit every quarter to be worth a quarter. If the company is losing money it is a highly speculative stock. A trader who buys a company with many quarters of losses is hoping the stock will get stronger and one day show a profit. I listen to Warren Buffet on this one. He said “Rule #1. Don’t lose money. Rule #2. Don’t forget Rule #1.” A speculative play on this type of stock is begging for trouble.

I recommend five or more quarters of profits exceeding 20% each quarter. This is a very good growth company with management that knows what they are doing. I like a business that has increased profits by the same 20% for five or more quarters as well. The same goes for sales, five or more quarters of 20% growth. When all of these factors are in place the risk factor is minimal so I have less chance of breaking Mr. Buffets’ rules. I also look for companies with little to no debt. There is a much smaller chance of this company going bankrupt which will do awful things to a stocks share price.

I like to buy stocks that are small or as they are called, small caps. These companies don’t have too many outstanding shares and when a solid company is being bought, demand increases for the stock and the share price increases more dramatically than if the company had 10 to 20 times the shares outstanding. I like to look for companies that have a new product that is a big hit with consumers. The ipod is just one example, one new product and the price of Apple shares increased from a low in the teens to over 80. New management in a stagnant company is also worth watching. Steve Jobs was a huge factor when he returned to Apple full time. Try to watch for insider trading as well. Most of the insiders will sell en masse when something fishy is going on. If there is a mix of buying and selling among insiders it should be considered normal. Heavy, consistent buying or selling tells you to watch out for disaster or a bargain.

Some traders try to beat the market trend. The market trend is the general direction of the market. If the market is showing an upslope on a chart over a period of time of anywhere from three weeks to years, it is in an uptrend. And visa versa. Don’t try to fight the trend. The trend is your friend. Follow the trend and you will have much more success than fighting it. It is like swimming against the current, it can be done but not very easily.


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