last updated February 08, 2015

Investors spend a lot of time asking What’s a good stock? Many investors take the advice of their brokers, while others rely on hot tips they read in magazines or on the Internet. When the market fluctuates so dramatically every day, it seems like picking a good stock is a matter of chance. Why not throw a dart at a dartboard and see what sticks?

Picking a good stock can be easier than that, if you keep two principles in mind.

Earnings Matter

Successful companies generate cash every year. By limiting your search to companies which are worth owning as businesses themselves, you avoid risk. You think like an owner. Good stocks belong to good companies.

You are an Owner

Because you are an owner of a business, your responsibility is to understand the business. Don’t worryyou won’t need an accounting degree or a big stack of MBA books. You only need to understand how the business works.

What does the company make? What does the company sell? Who are its customers? Who are its competitors? How will the company make more money this year than last year?

You probably already know this about several companies.

Think about your hobbies. Think about the products you buy. Think about the industries you or your loved ones work in. Think about the things you already know about, and then look for businesses in those areas.

Whether you’re passionate about airplanes or model cars or fashion, you can probably come up with a list of a dozen companies worth investigating. Find out if they’re publicly traded. Get their names and symbols.

How to Pick Good Stocks

With those two principles in mind, a good stock is a share of a company that reliably makes moneya company that succeeds in businessand that you understand well enough to know what that success should look like.

Is it a Great Stock Pick?

You’ve already done most of the hard work! You’ve narrowed down all of the stocks in the world to a handful you know something about, and you’ve resolved to understand just enough of the business to decide whether the stock is worth owning. The remaining question is What’s the right price for this stock? (That’s the secret of how to pick good stocks; find a great company at a good price).

Great stock picks are that wonderful combination of good companies available at good prices. If you want to be good at stocks, you have to look for bargains. The best things to invest in are hidden gems.

That’s where Trendshare comes in. We look at the finances of the company over the past several years. We analyze the basic financial numbers. We do the math. We’ll give you our best analysis of what the company has done and we’ll give you a price we think is fair for the company right now. (This is a technique called value investing. and it’s served people like Warren Buffett and Benjamin Graham very well.)

The rest is up to you.

You’re smart and motivated. You already know more about business than you think. You can learn how to pick a stocka great stock at a good price.

We’ll give you links to do further research (and we’re here to help you understand your investments ) so that you can use what you know about the company and its market to decide if its plan to make money are plausible. If so, buy the stock and wait for your money to grow. If not, move to the next stock. That’s it. That’s the secret about how to pick stocks: research and patience.

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