Business & Finance Investing & Financial Markets

Effectively Investigate A Stock

Effectively Investigate a Stock
 
Thanks to the internet
trading insider  is an
information overload when it comes to investigating stocks. Simply type in a
ticker symbol in any search box,
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  and within seconds you have dozens of articles and
related links on that particular stock.
 


As elementary as it sounds,

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many investors know what a share of stock is but often
ignore what it means. Stock is an equity
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  claim on the business. Specifically 
stock tips is defined as having a
residual claim on the business. A stock investor's claim on a company is
residual by debt holders and preferred stock holders.
 
The balance sheet gives a snapshot of the company's
financial position at a specific moment in time. As such,

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it is more important than the income statement.
Consider the various recessions in the U.S. in the past 50 years

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most of the companies that failed to make it
through had a balance sheet problem.
 
When looking at the balance sheet,

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you want to examine the indebtedness of a company.
Evaluate the debt in relation to total assets and equity value. Under tough
operating environments,
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  goodwill and intangibles are usually worth
very little for most companies.
 
Once a balance sheet has been examined it can be connected
with the other financial statements. Look at the interest expense line item on
the income statement and compare

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  it to the company's earnings before interest and taxes.
 
Management: Once you get a handle on the financials,
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  investigates management. Investigate Industry. If you
are still comfortable with the company,

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it's time to investigate the industry. One quick way to do
this is to compare numbers between competitors. Some great numbers to
investigate:
 
    1. Operating Margins: Does one company

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have significantly higher or lower margins than the others? Is
this a long-term occurrence or a one-time benefit?
 
    2. Debt to Equity Levels: Is the industry characterized
by high

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  low levels of debt? How does the company stack up?
 
    3. Capital Expenditures: Found on the cash flow
statements. Is the industry capital intensive?
 
    4. Competition: A great deal of competition can make it
difficult for a company to consistently earn profits,

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as these businesses have to compete on price.
 
If the particular company you are looking at has operations
in your area, go visit them. Some of the best analysis on a company is not found
in documents,

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  but visible through the day to day operations.
In the end,

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this investigative work will give you your unbiased insight
into the company. As a result,

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you are far more likely to make better investment
decisions based on quality data and analysis.
 

 




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