11) Stock Picking Strategies: Conclusion

by · October 16, 2010

Here are the fundamental concepts of stock picking we have learned so far:

  • The main focus of fundamental analysis is a company’s intrinsic value
  • In quantitative analysis, the worth of a company is all of its future profits summed up together.   This is also known as discounted cash flows.
  • Management, business model, brand name and industry are some of the qualitative factors that affect a company’s value.
  • Value investors are concerned with the present.  They look to a company that sells stocks lower than the current market price and sell it for a profit.  Growth investors look for companies with future growth potentials.  They look for companies that trade more than their intrinsic value.
  • The GARP method is a mixture of value investing and growth investing techniques.  Investors look for companies that are somewhat undervalued in terms of growth potential.
  • Income investors look for companies that pay high but sustainable dividend yield.  They are looking for a steady stream of income from their stocks.
  • CAN SLIM stands for: current earnings, annual earnings, new changes, supply and demand, leadership in industry, institutional sponsorship, and market direction.  Investors analyze these factors for stock picking using this method.
  • The Dogs of the Dow are the top 10 companies in the Dow Jones Industrial average with the highest dividend yield.
  • Technical analysis is concerned with past market activity to forecast future price movements.