Rank: Elder Joined: 9/23/2009 Posts: 8,083 Location: Enk are Nyirobi
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ojazy wrote:QW25071985 wrote:ojazy wrote:sparkly wrote:ojazy wrote:
...but its all a risky venture isn't it? Whether im in it short term or long term...
My strategy as a begginer would be to buy stocks that have good speculative hype and wait on them to soar in price,sell when i feel it cant rise any more and showing signs of declining...
Thats where the problem lies, you never know which will rise. Often the ones that rise very fast will be due for a correction sooner than later. And the ones that fall are also due for a correction. My strategy is to look for undervalued stocks and wait for a correction upwards. right...so how exactly do you analyse a stock and conclude that it is undervalued? The difficulty here is understanding what the TRUE value really is. The P/B ratio is the easiest way to determine a company's value, but like they say "its not magic" PB ratio= market price/book value if that ratio is below 1 than it is undervalued. But you have to look at so many other things, like what is going on in this company if it is "cheap". What is the industries standard. My other favorite areas when looking at a balance sheet for value is Free cash flow, PE ratios and the PB. I like looking at the management team and product growth numbers. I also look at the technical areas to follow where the good entry/exit points are, but before I do that, I have a general idea what the company is worth. None of this is magic, but I don't think you can say one thing is the way to go in anything. You need to look at all things, understand yourself to determine what type of investor you are and where your importance lies when making the decision to buy. You have to be comfortable with your decision. You can also compare the P/E and the expected growth rate of the company The comparison is called the PEG of the stock. If the PEG is below 1.0 there is a possibility that the stock is undervalued. If the PEG is above 2.0 there is a possibility the stock is overvalued. One does have to be very careful using the PEG ratio because it is based on expected growth rates which may or may not be correct. There very very many ways to calculate the true value of the company...But the underlining word is that YOU HAVE TO LOOK AT FIN. REPORTS CALCULATE Owkay!That sounds pritty complicated for my beginers knowledge,but let me take a look at all that and try to understand it. Thanx alot mate. Got any more pointers? When looking at financials, look at growth of sales, healthy margins, acceptable debt, free cashflows (esp for companies that need to replace capital assets), stable or increasing dividend payout. Life is short. Live passionately.
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