Instructions

Make a list of companies you admire. These should be corporations that make products or services you personally know or have used. Expert trader Peter Lynch suggests in his book Beating the Street that investors avoid companies with a hot new drug or wild new idea. Companies such as McDonald’s and GE were built on excellent execution as much as a good idea.

Dig into financial data. Easy data to find when deciding a stock to buy are the revenues and profits of a company. If revenues are down, the company has experienced slowing sales. Look for possible reasons this may have occurred. If profits are up and revenues are down a company may have cut costs. If profits are up similar to revenues look for reasons a company may continue this trend as well as reasons the trend may reverse. Knowing potential dangers before investing will help you more reliably pick stocks successfully.

References

Beating the Street; Lynch, Peter, and John Rothchild; 1993

Resources

Motley Fool: Home Big Charts: Home

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