Analyze Your Stocks And Double Your ProfitPosted by Nick Niesen on November 8th, 2010 An investor buys a share of stock by resorting to various approaches that validate his investment by reaping rich profits. Before investing, however, it is necessary for a value investor to study the financials of a business, so that the stock he buys at the company?s intrinsic value promises a greater return at its liquidation value (the value of a company if all its assets were sold). A typical investor would buy growth stocks that have an upward trend, and seem likely to keep growing for a long time. Whereas, a technical investor (also known as a Quant) makes decisions based upon the psychology of the market and related factors, which involve much higher risk but may prove to be more profitable, or, can conversely result in much greater losses. The fundamental analysis of any business can depend on various factors: efficient market theory, value and growth, growth at a reasonable price and the quality of the business. 1. Efficient market theory pertains to stocks being always correctly priced, as all the requisite information is available on the current price. Value investors need to rely on certain stringent rules governing the nature of the stock which adhere to the following criteria: 1. Earnings: company earnings are profits after taxes and interests. Learning to analyze one?s stocks and thus reaping the desirable profit is in fact a continuous process, as no amount of market efficient theories can ever predict a flawless financial return system. Even though one invests judiciously by studying the market, the over-valuation or under-valuation of stocks can often be determined by market emotions. Like it? Share it!More by this author |