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Wall Street secret to identify a winning stock - Alldamoney

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Wall Street secret to identify a winning stock


Photo By Simon Cunningham
What are the things you should watch out for when buying a stock?.The art of selecting a winning stock for long-term investment needs the right strategy and approach. You can increase your personal wealth exponentially if you become a good stock-picker, for example let’s say you invested in Bill Gates Microsoft IPO back in 1986 and held that investment till 2004, your return would have been around 35,000%. In a nutshell, a $10,000 worth of Microsoft shares would have turned itself into about $3.5 million value just within this time span. With returns like this no wonder investors continue to hunt for the next Microsoft.
We will start by delving into one of the most basic and a crucial aspect of stock-picking which is the fundamental analysis, the theory of fundamental analysis underlies all strategies involved in picking a stock. Sometimes though, investors overlook the most obvious answers. When searching for companies that will be the most profitable in the future. The firms that are most profitable today as it turns out might not be profitable in the future and based on research findings profitability is defined in terms of gross profits, or total sales less cost of goods sold.
Precisely most research doesn’t suggest that all of the currently most profitable stocks will be at the top of the list in future years. After all, past performance is no guarantee of future success. But, on average, they should be far more profitable than firms currently making the least. And their stocks tend to perform better.
For long term investment the “cash flow statement” is the main source used to pick stocks. While other parts of the financial statement are all considered important one part that should be critically examined is the cash flow .This is because a lot of company financials are tweaked by creative accounting but cash flow analysis can't really be manipulated.
It is the lifeblood of a company so it’s straightforward and helps you gain an under the hood look at the company's true financial health.
This could be done by examining all components of the cash flow statement and then take Gross Profits and add Depreciation then minus Capital Expenditures.
Such as this
Gross Profits + Depreciation - Capital Expenditures.
Do this for the 3 years consecutive years released in a financial statement. You can get this from major financial websites.
The final aim is to see how cash flow performed it is generally agreed on that cash flow should increase at least 10% or greater year on year.
If so, then you've got a good stock within your grasp another important factor to consider is if the stock is paying out dividends or buying back stock. This action will indicate if the managers are investor friendly. Good managers tend to seek capital return to investors. And not hoard cash or dilute their share value.


For the short term,4 key traits hold the key for performance This includes: Accelerated earnings, Explosive price action, new price highs, High  relative strength. Another good tip is stocks that have lower Price/Earnings ratios (PE values) this comes with an added advantage when they begin to emerge as leaders.  Lower PE values show that the stock is undervalued so once institutions begin picking up the stock then it has the added benefit of expanding to fit the industry average.
Finally, there are secrets to the market that no Wall Street outsider will ever know.
But the one secret that everyone agrees to is that trading/investing is hard work.  You have to apply a reliable method to succeed.  This is the most important and If you work hard then you'll have a major edge over other people because other people are looking for shortcuts and an easy way out

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