The Basics On How To Research Stocks

Dealing with stock investments is a very tricky and risky job. Some even compare it to gambling because there is always no guarantee on what the outcome of the trade will be. What separates the gamblers from the investors is research. Data gathering and analysis is an important part in the success of a particular trade.

You may not have the time or the patience to conduct experiments; however, there are individuals or firms available to offer you their services for a certain fee. There are brokerages, especially the larger and more stable ones, which offer research for the existing clients.

The most successful investors consider research as a part of the entire trading process. When you give importance to research before buying or selling, you are already investing. And the result of such research will be beneficial.

The first thing you should do if you want to know how to research stocks is to gather data about the current trade practices being employed in the stock market. You should also be aware of the different companies playing in the market. The most unbiased sources you will be able to acquire are actual filings of publicly traded companies.

There are different reports that can be presented by a company. One is the 10-K. This is somewhat similar to annual reports, and they are available for download at the website of SEC. The report that is filed quarterly is called the 10-Q and the one that is filed for certain important changes in between is called the 8-K.

The reports contained in the aforementioned reports are the latest information on the company's financial status - their income, expectation, competition, lines of businesses and the members of the board. Fundamental analysts use this information as tools to be able to come up with their trading strategies.

Companies produce quarterly and annual reports to be circulated among its share holders. However, the contents of the reports are available for public knowledge and scrutiny. These reports have some data similar to 10-K's and 10-Q's, but there are several subtle and minimal changes as well. These reports can be very beneficial on how to research stocks.

For a minimal fee, certain brokerages offer copies of chart data of the different companies participating in the stock market. Most of these companies are their clients for whom they also offer research services.

Another source of data are newsletters. These newsletters contain the most recent events and updates that are happening in the stock market and its active players. There are so many newspapers available to help aid investors. However, with the large number of these newsletters, it would be a little bit challenging to find reliable publication.

CEOs, CFOs and other members of the board often give interviews or conferences to the financial press. They give information on the company's financial status and assures the public their companies are sustainable and strong.

All the data that has been gathered during should kept in mind and used to be able to make it big in the stock market. It is very important to know how to be able to research stocks in order to find reliable data to help aid in the formulation of trading strategies.

About The Author

Luke Cameron is owner of Top Finance News - an online magazine offering news, tips and articles on finance related topics. His website can be found at: http://www.topfinancenews.com.

Cyclic Stocks vs. Growth Stocks

In the long run the economic performance of most countries is showing an upward trend. But, although this is true, the global economy and that of individual countries is always subjected to ups and downs.

Many sectors are especially exposed to these up and down swings.

Building and construction companies, automobile companies or steel manufacturers are all hanging on the economy like a marionette on strings. Large profits are taking turns with setbacks or even huge losses during a recession.

And the shares of these companies and sectors are substantially affected by the up and down swing of the economy. When profits increase in good times, more often than not, these stocks skyrocket disproportionately. But when profits decrease, investors let go of these stocks as if they carry the plague.

OK. You might say that this ain't a problem. You just buy cyclic stocks when prices are down and sell when prices are up. By low and sell high!

But unfortunately the economy isn't quite that reliable. Especially not the stock market. If it was that easy to make money with stocks, lottery companies would all go out of business in no time.

There are all kinds of factors that can get in your way like wars, a financial and currency crisis like we had in Russia and Asia in the 90's. Or oil prices are giving us a hard time again.

So you can't tell with absolute precission when your stocks have reached the bottom just like you can't accurately tell when your stocks are at their very peak before the market corrects again.

A nice example for cyclic stocks are General Motors and Ford. The stocks of these 2 companies have performed so badly in the past that they were downgraded to junk status by the rating company Standard & Poors.

The headlines at marketwatch.com read this:

GM, Ford debt cuts take toll on stocks.

S&P slashes automakers' credit ratings to junk status.

Shares of General Motors slid 5.9% while Ford shares fell 4.5% after Standard & Poor's cut its long- and short-term corporate credit ratings on GM and Ford to such a low level, that the word "junk status" was out faster than the 2 stocks fell that day.

But what can one expect if you look at the stock charts of these two corporations.

To view the charts, please click the following link: http://www.stockbreakthroughs.com/Newsletters/cyclic-vs-growth-stocks.htm

Holding on to these stocks makes no sense and is a waste of time and money!

Often the reallity with cyclic stocks is, that investors get in to their trade too late and also get out too late. The media is also to blame for this. When the word of an upswing is out, it's in full swing already. It hasn't just started. Buying then is senseless for an investor that speculates on buying low and selling high.

And when the headlines scream "Recession", the bottom of the valley has already been reached long ago. Selling now makes little sense because by now prices are in the red again.

Also with growth stocks there's no guarantee for the fast and easy buck!

But they have one huge advantage:

In the long run, their prices only point in one direction...UP!

The entry point for a long-term investor is by far not as important as with cyclic stocks. Setbacks are more seldom and, with few exceptions, also not so violent.

A stock like Johnson & Johnson (J&J) or General Electric (GE) is the perfect example for a strong and solid growth stock:

Again, just click http://www.stockbreakthroughs.com/Newsletters/cyclic-vs-growth-stocks.htm to view the charts.

The 3 dips in J&J's chart and the one in GE was only due to the overall global recession between 2000 and 2003 after the big "Internet Bubble" popped. But while most cyclic stocks are still at the bottom, J&J and GE have long been on their way up again.

These kind of stocks you can always buy without any second thoughts.

In my experience, cyclic stocks will lose you more money and cost you more nerves than you can ever make up for with a few lucky "cyclic" trades.

Yours in Successful Trading,

Ricky Schmidt

About The Author

Ricky Schmidt's website http://www.stockbreakthroughs.com was created out of frustration in trying to decode books, magazines and newsletters on the subject, which are supposed to be forbeginners but are not because they’re too difficult tounderstand. Too many “Big Words” and too much intelligent sounding grammar is used which is not very useful.

Penny Stocks

Penny stocks are usually not listed at the major stock exchanges like the New York Stock Exchange (NYSE) or the NASDAQ because they don't meet the listing requirements. Listed stocks must have a minimum number of shareholders, minimum assets and file financial reports regularly. They are also under the strong supervision of the SEC, the Securities and Exchange Commission.

Penny stocks are usually traded on the OTCBB or on the Pink Sheets. The OTCBB (OTC Bulletin Board) is an electronic quotation system for over-the-counter securities that are not listed with one of the national stock exchanges. The only requirement is that the companies file financial reports to the SEC. If not, the company is removed from the OTCBB listing and the stock can only be quoted on the Pink Sheets. The Pink Sheets activities are not supervised or regulated by the SEC.

If the company has less than $10 million in total assets or less than 500 shareholders in total then no filings must be done at all.

Penny stocks are for these reasons wide open to scams and manipulation. The stock price is usually far below $5 and market capitalization is very small as the companies itself are very small. The lack of reporting requirements can make it difficult to find verified information about the company, its financial situation and outlook.

Many fraudsters take advantage of this and publish misleading information to manipulate the stock price. Because of the lack of public interest and low number of shareholders the trading volume is generally low. This means that a few buy or sell orders can have dramatic effect on the share price.

The low liquidity is at the same time the biggest advantage of penny or micro-cap stocks. While a listed stock can almost never move several hundred percent within a few days, a penny stock can do that easily. The low share price makes it possible to acquire a big amount of shares with a small amount of money. Little price increases or decreases have therefore big impact on the performance.

The low stock prices and limited capital requirements often attract novice traders but penny stocks are definitely a playing field for experienced investors only. Penny stocks are high risk investments. Many companies won't probably succeed and go bankrupt. The shares will end up worthless.

Many penny stock companies have no or very limited working capital, assets or are in development stage for months or years before any revenues can be expected. Be aware that you probably can't sell your shares for days or weeks or only at a big discount because of the limited liquidity.

About The Author

David A. Sorenger is a stock market expert and provides detailed information on stocks, options and online brokers at his web site http://www.StockTradingABC.com.