How to Find Stocks to Invest In
Google came to the stock market in 2004 at $ 85 per share. Those who bought 10 shares and kept them up to date now have more than $ 20,000. This amounts to an increase of approximately 2,500%. Investors in Apple or Amazon can tell similar stories. But how do you find these shares? It is of course not easy to find the next Google, Apple or Amazon. It is even more difficult to keep track of these shares over the years. These shares also already have a correction of 50% or more. But before you can keep track of them, you must first find them. How do you proceed?
Some of you may find it difficult to find great stock ideas, after you’ve looked around at the big names like Coke, Proctor and Gamble, Ford, you may ask yourself how do I find the next big thing or how do I find more companies that are traded publicly? Matter of fact is that great stock ideas are everywhere!! In this series of Articles/Videos I will show you couple of ways I find stocks to invest in.
A great place to look around for stocks to invest in is “The Wall Street Journal”. This is the crown and jewel of financial newspapers. A co-worker of mine told me one day “read the Wall Street journal everyday for a month and you will become a much wiser and interesting person”. I took that comment very serious and decided to accept the challenge. I started reading everyday and boy did I learned during that month. The way I see it is the Wall Street Journal hires only the best minds in journalism to convey their stories so why not take advantage of this opportunity to learn from the best minds on Wall Street.
Remember the key to being a successful investor and to find great stock ideas is to always think outside the box. Think of what moves the market and what will be the next big trend. Think who is behind the materials you find yourself using everyday. For example you may love iPhones, but who is the chip provider? Who is behind the security of the system? This companies can and will make a lot of money because of the deal with Apple for iPhones.
Now here is the secret to finding great stocks to invest in:
If you don’t have time to read the entire paper just read all of the top stories on the left column of the front page. You will find what is moving this markets, and what can possibly move the markets tomorrow. You will also find names of companies you might’ve overlooked or didn’t know they where there in the first place.
Let’s do this in a real example.
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Just by looking at the Business and Finance Column we see headlines such as “Comcast is weighing an offer for Time Warner Cable” “The S&P 500 closed above 1800 for the first time.” Google Working with eyewear distributor” Lockheed and partners” “TGI Friday’s owners is putting the restaurant chain in the auction block.”
Let’s stop with these great ideas we are getting just by the headlines. Now it’s time to analyze them remember thinking outside the box, how a single factor can affect many.
If you have time, read the whole article as I mentioned before and I mention over and over again on “The Investment Class”. Read as much as you can on the subject of money, you can never have enough financial education. Besides the writers of the WSJ are some of the most dedicated journalists you will ever meet. You get a chance to pick their brains for a little.
Let’s start the thought process….
What does the headline from Comcast making an offer for Time Warner Cable tells us. We can assume that Comcast (A video, voice, and internet provider) is trying to expand it’s business and Comcast may desire to acquire Time Warner’s large costumer list, their antenna’s spectrums, technology, etc. Comcast may have enough money on their balance sheet to finally start acquiring key players in the business. The questions to ask ourselves are: What if Time Warner says NO? What companies are also possible targets of acquisition by Comcast? Who is Comcast making deals with? If they are planning to increase sales, Who is the fiber optic cable provider for their Internet connection?
*The thing that I want to teach you is to dissect a company entirely. Think about everything, who provides who and what? Who are the key players? Where are they going? What business profit from an expansion?
These are the types of question you need to ask if you want to find winning stocks.
About the macro
Headlines such as “The S&P 500 closed above 1800 for the first time.” can bring us a little inside of where the economy is going. We may assume that because we have been in a bull market for so long it must come down eventually. We might remember the old say “Be greedy when others are fearful, but be fearful when others are greedy” The S&P breaking a record to 1800 indicates that there has been many overenthusiasm for the market. This might be an indicator to start hedging your position, or you might want to take some of the gains you’ve made during the year.
See Also: How the Economy Works (Video)
More on headlines…
Headlines such as “TGI Friday’s owner is putting the restaurant chain in the auction block.” This headline might indicate us that TGI Friday’s might know something about the restaurant market that we don’t know, how is it that a huge name like TGI Fridays is considering selling their restaurant chain? Is it for the pure profit? What other players will be affected? Maybe it’s time to buy put options (betting against a stock) on restaurant stocks. There are many ways we can play this headline, and many ideas that can come into mind.
After you’ve read and dissected all the important news, choose one that seemed more appealing and please DO homework and analysis before you buy the stock. This method is to help you find great stock ideas that you have not thought about before; they might even have some catalyst (Something that initiates or causes an important event to happen.) in the near future.
What you need to take from this article.
- Remember to read as much as you can, it will only make you a more educated and interesting individual.
- Think outside the box and dissect every form of news you read, it might lead to the best investment you’ve made.
- Remember to always DO your homework on the ideas gotten from your dissection.
- Educate yourself in the subject of money.
Let me know what you think in a post below!!