Stock picking

bigfreddiel

How do you pick individual stocks to invest in?

Do you have an edge over the 'professionals' who have resources and access to information an individual can just not match.

Any resource you do have or information you base your decisions on has already been built in to the share price.

So how do you do it?

Cheers fj

ChesterDog

Not quite answering your question, but a personal counterpoint to it...

I don't.

No.

Exactly.

I stick to indices and collective investments.

somethingcorporate

The more I follow the market the more I think the whole thing is irrational and the only people that really make money are just lucky.

Bazofts_Revenge

Probably just random luck but rather than what I select what is more important to me is the companies I avoid. I tend to avoid commodities and companies I don't like. I try and go for companies that pay out about 4% yield and have a cover above 1.5. I listed my main Share dealing portfolio on another thread. Some will state that many of my shares don't fit that but I will have when I bought them or in the mean time prices have dropped and I've bought more or the price has gone up and the yield has gone down.

jimjames

somethingcorporate wrote: »

The more I follow the market the more I think the whole thing is irrational and the only people that really make money are just lucky.

People that make money are probably more likely to be those that buy index trackers and hold long term.

I don't pick individual stocks because I can't see it being worth it if I can't guarantee to beat the market.

grey_gym_sock

i don't believe i have any "edge". and yet i do buy individual shares.

!!!!!!?

there are several reasons.

i started doing this some time ago, when
(a) i knew less about how little i know; and
(b) there were no very cheap tracker funds available.
so why change tack now, incurring transaction costs, when i can do as little as possible, viz. just trim a few holdings which have got excessively large, buy the occasional extra share, preferably in a sector which i have nothing so far?

also, the UK market (and my individual shares are only in the UK - i have collective investments, mostly trackers, for the rest of the world) is rather concentrated in a few shares and a few sectors. arguably, i can get better sector diversification by buying my own shares, instead of a ftse all-share tracker. though a combination of an all-share tracker and aberforth smaller companies IT might be good (and that is roughly what i have for the UK allocation in my SIPP - which doesn't have individual shares, because it was started more recently, and its UK allocation isn't big enough for a portfolio of individual shares). so actually, that's not a very good reason.

also, buying individual shares allows me to filter some out for ethical reasons. there are various "ethical" funds out there, but they are unlikely to be aligned with my views, and tend to be rather expensive.

and, of course, i still don't 100% accept that i have no "edge". when i last checked, i was minimally ahead of where i'd have been if i'd shoved the money into a (cost-free) all-share tracker instead of using it to buy individual shares. but perhaps i'm becoming more skilled over time? hope springs eternal. the main point of measuring performance is so that, if i'm doing really badly, i can scare myself into ditching the individual shares. as long as nothing disastrous is happening, it is OK, and it doesn't take much effort, now that i'm only making minimal changes to the portfolio.

Linton

bigfreddiel wrote: »

How do you pick individual stocks to invest in?

Do you have an edge over the 'professionals' who have resources and access to information an individual can just not match.

Any resource you do have or information you base your decisions on has already been built in to the share price.

So how do you do it?

Cheers fj

Dividend Yield > 4%
Dividend cover > 1
Profit making over past few years
Consistent dividends, preferably rising, over past few years
Does it improve my sector balance?
Does it improve my large/small balance?

Shmo

I see stock picking as more of a hobbyist activity rather than the most effective way of making money. I'm probably not going to see a return proportional to the time invested over buying a basket of tracker funds, and I certainly increase my risk by holding a far less diversified set of assets. But I do get enjoyment from buying stocks in good companies at what I consider to be a bargain price, so I suppose there is value in that. I guess you always have a chance of spotting the next ASOS just at the right time but this is like aspiring to win the lottery in my view.

Share prices certainly aren't just a function of company news/results however. Prices can fluctuate purely on the interests of buyers and sellers which is particularly apparent in low volume small cap stocks. Sellers might need to generate capital at any time for a variety of reasons thus creating an opportunity for buyers to enter at a price that might be considered cheap.

economic

with some of the posters here going for minimum yield and dividend cover, there were a lot of stocks (supermarkets, oil companies) meeting this criteria and would have lost you a fortune had you piled in. goes to show everything works in cycles and timing is everything. but for long term buy and hold nothing beats trackers IMO. buying individual stocks and holding long term is a huge risk and a mugs game.

Linton

economic wrote: »

with some of the posters here going for minimum yield and dividend cover, there were a lot of stocks (supermarkets, oil companies) meeting this criteria and would have lost you a fortune had you piled in. goes to show everything works in cycles and timing is everything. but for long term buy and hold nothing beats trackers IMO. buying individual stocks and holding long term is a huge risk and a mugs game.

I would have thought people would have preferred maximum dividends with maximum cover, not minimum.

The trouble is trackers dont give you so much income. If you have retired, extra fairly steady and fairly effort-free income comes in rather handy especially if it is tax-free. Dividends tend to be rather more stable than share prices as companies try to avoid cutting dividends if they can. For example, so far Shell's dividend has been constant in £ terms despite the share price falling by about 30%. To someone who wants longterm income the fall in share price makes no difference, except perhaps as a signal that a bit of rebalancing may be benefiicial.

Buying individual shares and holding long term isnt a huge risk provided you hold a good number of them. 15 might be a reasonable minimum. Also you need to ensure that your holdings are broadly diversified by sector.

economic

when a stock falls 30% in a short amount of time usually its because of profit warnings and dividends will most of the time get cut.