What are the most important reasons for buying a stocks?

Question

What is your opinion on the most important reason to buying a stock on the stockmarket. This may include reasons like increase in revenue, the P.E ratio or just thinking it is a good company. Please leave a detailed answer i will give 10 points for the best answer.

Answer 1

The reason for buying stocks is to earn greater profits compared to other forms of investments. Selecting a stock may be done if it meets the following criteria:

(1) PEG ratio less than 0.5
(2) Sales growth greater than 25%
(3) Net profit growth greater than 25%
(4) Sector is outperforming the broad index.
(5) Profit to risk ratio is greater than 2
(6) Price increase is supported by increasing volume
(7) Return on Net worth is more than 25%
(8) Good management
(9) At least a few mutual funds should have bought the stock
(10) Do some research on the company.

Answer 2

I look for a stock that shows a pattern of consistent growth, first of all, say a minimum of 10% average annual growth for the last five years in earnings per share, sales, book value per share, and free cash flow. Next, it should have a wide moat, something distinctive about the product or company that protects it against competitors, for example a widely recognized brand name, a patented product, or a way of producing a product at a cheaper price. The company should also be efficient, with at least 10% Return on invested capital and healthy profit margins. Make sure that the management is knowledgeable, smart, and places stockholders' interests first. Watch out for CEOs and management that are looting the company at stockholders' expense. I also look for companies that are trading at a discount to their fair value. These are the main things.

PE is not that important, but be very careful about any stock with a PE over 40. And as a rule, I won't purchase a stock with a PE over 50. Other attractive factors are an average analyst rating between 1-2 (as reported in Yahoo! finance). A PEG ratio of 1 or below is also a good sign. And low P/S and P/B ratios are also good signs; anything below 2 is extraordinary. When you're looking at numbers, however, you have to compare to similar businesses, since some businesses tend to have higher PEs and others have low profit margins, and so on.

Answer 3

Since 1929 any ten year period has provided at least 10% growth in the stock market. I once took an investment course that started with the instructor holding up a 5 dollar bill saying, "It's 1950, how many subway rides does $5 buy? (I live in NYC). The correct answer 100 @ a 5 cents fare. Back to 1950, put that 5 cents in a interest bearing savings account. In 2006 with interest, how much is it worth today? About $1.00. Now how much is the subway fare today? $2.00. If you just keep your money in a bank you lose because of inflation. You must invest.

Answer 4

To me, the most important reason to buy a stock is that it fits my rules and gives me a chance to make a profit.

In the short term, I'm primarily a technical trader. I trade breakouts, earnings, and other patterns. NYX, AAPL, and ICE are current examples.

In the longer term, I often look at fundamentals. Strong stock in strong industry or weak stock in weak industry. I ride the stock until it turns. Then I find another one to ride. Keys to why they're strong or weak lie in the earnings, earnings growth, accumulation/distribution, EPS, PE Ratio, Sales and EPS Growth, insider trading, and so forth. Examples of this might be JCP in the retail industry, or AIG in the insurance industry.

Hope that helps!

Answer 5

regrettably, i will't contact the classic ones both. too a lot off stability sheet Enron form accounting linked with them and that i'm suspicious they could generate that a lot develop besides once this snowballing subprime mess blows over. I do carry stocks in CSH (a pawn save) that is fairly in case you imagine about is administered moreover a monetary agency yet its loans are collateralized nicely below e book fee. I also carry some stocks in classic monetary stocks yet in rising markets which have economies tied to commodities. BAP is an party.