How to Research a Stock Without Fuss

Kaia Zawadi

By Kaia Zawadi
Posted on Fri Aug 23, 2013, Last Updated on Fri Aug 23, 2013

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How to Research a Stock Without Fuss

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With over 2,500 stocks listed on the NASDAQ, it can get confusing if you’re not as well versed in stocks or mutual funds. You may still have questions as to what to look for in a stock before purchasing it.

Consider whether the value of the stock or if the investment fits in with your desired long-term goals and your portfolio. You should never invest in stocks that you don’t understand, and educating yourself about stocks in general is the first step to getting the most out of your investment choice.

After finding an industry that you’re interested in, find out if it is publicly or privately traded. It’s not as easy to invest in the private sector; check out their competitors and research the company. There are several things to consider when researching a stock.

Last trade

The close is the price the shares sold for when the markets last closed. Open is for what they started at the beginning of trading. Sometimes the prices may vary as they may change even after trading hours. The markets will adjust the price when it opens again.

Bid/Ask: the prices that dealers and market shakers pay and sell the shares for

The bid or offer price is what the dealer pays when a shareholder sells their shares and the ask is the price they wish to sell their shares on the open market.

Yearly Target Estimate: the average estimated worth of the shares in one year

Daily Range: this highlights the lowest and highest price for which shares are traded on a particular trading day.

Market Capitalization: look at what others would pay if the company were for sale

The number is figured by taking the quoted price per share and multiply it by the number of shares. If there are 3 million shares and the quoted price is $40 per share, the market capitalization is $120 million. Compare companies with similar caps and see who is making a larger profit.

Earnings Growth

Look at the stock carefully and its earnings and determine whether or not this is something that you will still have faith in years down the line. Look at certain factors — such as if the growth is steady and how much the company has grown and been sustainable.

Growth Oriented Industries

It’s reasonable to assume that the two industries that will do well in the future will be the healthcare and pharmaceutical sectors.

International Investing

If you’re thinking about taking your investments overseas, investigate the region’s internal stability as events such as a coup can cripple a country’s economy.

P/E Ratio

This can give you an idea of what the value might be. You can compare the ratios of different stocks which reflect the stock price relative to its earnings.

Dividends

A reputable company with a healthy financial history can afford to pay out dividends, with increasing payouts over time. Look out for companies that offer high dividend yields that haven’t been around for long. This may not bring a long term stock investment.

Study the company’s financial statements and prospectus that can help you make a better decision.

 

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