When I describe my stock picking strategy, many people think it's weird.
I wrote about my Stock picking strategy before, you can read it here.
Here is my updated list:
1. The stock should pay dividends. I added it as a rule. I still have stocks from my "before dividends stocks picks", which I am waiting to sell.
2. I have my list of stocks I like, which I update monthly here
In order to put stocks on my list I look through
- all financial data - Ratios, Income Statement, Balance Sheet. I make sure all their numbers are positive and debts make sense.
- 10K, 10Q (not always) - usually if this is unfamiliar stock and I need more info
- company website, especially if I am unfamiliar with industry or stock. The stock should make sense to me - well known brand, love by many, one of necessities, have future, etc.
- Insider transactions ( I do not like when insiders are selling)
- Historical prices and years of dividends
- Current articles and reviews (just to see what's going on)
I watch my list on yahoo finance. I created my customized view, which helps me track my stocks.
It includes
Stock name / stock price / change&%change / 52-wk high/ 52-wk low / Yield / EPS/ PE/ Div Pay date/ Ex Div Date/ 1-yr Trgt price
I like how I can sort by different criteria and I can easily see how each stock is doing.
3. I move stocks to my "Maybe to buy list" if
- stock is already on my watch list (it means I already research stock)
- it is trading close to 52 week low
- 1 Year Target Price is higher then stock trading price
4. I sell stock if it earned >35%, not including dividends, stock is trading at the same price with some ups and downs for 2-3 months and if the current price of stock exceeds 1 year Target price.
I mostly use my IRA accounts for these kinds of transactions.
Some of you asked me why I sell my winners. I have limited capital and by rotating stocks - repeatedly selling winners/buying losers I can increase my capital faster.
5. New stocks.
- I review % Losers and Most Active on Yahoo Finance daily. I check if any stocks can be added to my list.
- I analyze other bloggers stocks picks
- I read Financial part of local newspaper.
Here is my small beginner tutorial I made for my son - How to pick a stock for Loyal3
How to Start Investing in Stock Market with $10 and hopefully earn $$$
What about you? How do you pick your stocks?
Good job! That is thorough research.
ReplyDeleteSome things I look at it are:
- Dividend Yield (prefer 3% or higher)
- Dividend history/years paid/years increased (I like Dividend Aristocrats)
- Current dividend yield versus 5-yr average
- % below 52-week high
- P/E ratio; current vs. 5-yr average; current vs. industry average
- P/B
- Beta
- Payout ratio
- A company I understand; whose products/services I use; has large market share; well-established
- My gut instinct
My stock-picking strategy continues to evolve and may be a little different each time I purchase stock.
Regards,
Dear Dividend
Hello Dear Dividends, thanks for sharing your strategies! Yes I do dividends history and prefer 3% of higher and my gut instinct as well. :) and I keep updating my strategies too. I guess we live and learn.
DeleteSounds like you have a solid plan! I do pretty similar research on stocks as you do. I'm not sure about selling winners though, especially if it is done in a taxable account. Generally it is better to sell losers to harvest losses. Also, losers tend to continue to lose and winners tend to continue to win, so I'm not sure frequent turnover would help returns.
ReplyDeleteI tend to look for stable companies with generally increasing sales, income, EPS, dividend, and book value per share, and with high ROE on relatively little debt. I prefer payout ratio under 40%, ideally under 20%. I don't exclude non-dividend stocks, if the company could afford to pay a dividend but simply chooses not to, especially if growth is strong and/or using buyback to decrease share count.
Regards,
JTF