How To Choose A Stock?

[Deleted User]

I like that.

Voyager2002

ZingPowZing said:

As I say, the opening poster has the right strategy (in my opinion). 
Start with the sector you believe in - tech - identify the best market to invest in them - Wall St - and choose one or two. Don't buy a diverse bunch to start, it's easier to add than to subtract. 
As you rightly say, JohnWinder, the current price is always the "right" price, so don't wait for an auspicious day to take the plunge.
As the stars incline, you may get off on the right foot, Shopify is up 174% over the past year, Spotify 131%.
And now you're in a great position. 
Going forward, much better prepared, to weather the volatility that comes with holding a poker hand of stocks, rather than a fan card of funds.

That strategy is extremely risky. Most people should do as you suggest with perhaps ten per cent of their investments and make sure that they enjoy doing so, since they might lose everything and so at least should get some entertainment from the process.

Steve182

alice131 said:

thanks to all of you guys, as this was my first thread, i didn't expect much responses. Some of the responses has some very good valid points, and i will try to keep those in my mind. I am just 25, and i just started investing 10% of my monthly income directly to stocks, as that money is not going to affect me even if it's lost. I don't know i am wrong or right, i just think about the company vision for future before buying any stocks.

For example: Spotify: we are moving from a free internet to subscription based services like prime video, amazon prime, news website subscription etc. So i have this feeling that in 5 to 10 years we will see most of the companies will offer subscription based services, and even some will only offer subscription based services. Subscription based model are much more powerful than ads driven business. Because if you buy the subscription of spotify and you really like it then you are going to stick with them for long term. and there are so many reasons.

I am not the expert, i just focus on the vision of the  company who are doing good in my sector of expertise.

I definitely relate what you are doing because it's almost exactly the same as I did 4 years ago.

Opened an ISA, bought a couple of Amazon shares, a couple of hundred Scottish Mortgage etc etc...

Then a year later I took the big gamble and transferred several hundred £K out of my poorly performing company pension into a SIPP and invested in Amazon, Alphabet, Alibaba, JD.com, Scottish Mortgage etc etc. I've been fortunate and the bet looks like it's paying off. I now plan to retire early with no reduction in annual income.  Sale of my own company shares has also really helped. Make no mistake, I was fortunate, especially with my timing.

I've also learned from my mistakes though. Stock picking is very hit and miss. I actually find it very difficult to know when to sell. That's harder for me than working out what to buy. You should seriously watch some Scottish Mortgage webinars. Their investment mentality will be right up your street I can assure you and even if you choose not to invest in that trust just looking at their portfolio will give you so many investment ideas.

JohnWinder

If the current price is always the right price, noted above, and if the price reflects the future returns on the investment, how could any one stock be a better choice than any other stock unless by luck or knowing something that almost no one else in the market knows?  I think it's luck which will give one the result which could be well above market average, well below, or anywhere in between. Which makes it a game for the rich, the young (if they've got plenty of human capital which makes them rich), or the brave.

Steve182

Voyager2002 said:

alice131 said:

i just started buying Us stocks on Kuvera. i want to invest for long term, so any suggestion on how to choose stock. For now, i mostly pick tech companies like Shopify, Spotify etc, as i believe in those companies as a tech guy.

The USA is so twentieth century. Vietnam is the future.

Accelerated economic growth is likely to result in Vietnam becoming a far wealthier country in the coming years and overtaking many others in GDP ranking. I believe this and I have significant investments in Vietnam.

Be careful though, sometimes there is little or no correlation between economic growth and stock market performance. 

JohnWinder

'Equity market returns and earnings growth rate are largely uncorrelated with economic growth across the world for all capitalization-size segments. The author expands the scope of previous research carried out for large-cap stocks to include mid-cap and small-cap stocks for developed and emerging markets.'

https://www.cfainstitute.org/en/research/cfa-digest/2015/10/whats-growth-got-to-do-with-it-equity-returns-and-economic-growth-digest-summary

[Deleted User]

Longterm, I think renewable energy, solar/wind/hydrogen etc., is the future and you could do well if you choose the right stock.

More volatile, but something that has peaked my interest is Silver bullion (physical silver).  It's heavily shorted and there is a lot of 'talk' about it.  Might be more for traders than investers though, but if we are headed towards a market crash and recession (as predicted), could be something to look into.  #JustMyOpinion #iKnowNuttin   Good luck.

Sebo027

alice131 said:

i just started buying Us stocks on Kuvera. i want to invest for long term, so any suggestion on how to choose stock. For now, i mostly pick tech companies like Shopify, Spotify etc, as i believe in those companies as a tech guy.

Known by stock pickers as "doing diligence" or "DD," you need to learn to justify your "belief" with basic economic analysis based on the following variables, to name a few but not all: 

• Market value to book value. 

• Price Over Earnings Ratio

• Debt to book value

• Debt to market cap value

• Total Assets - Do total assets increase or decrease from previous year?

• Financial Assets - Check the exposure to low quality debt?

• Inventory - Is it higher or lower than last year and why?

• Debt - Is debt growing or reducing year on year?

• Derivatives - Does the company have derivatives and how much?

• Equity - Does the equity increase year on year?

• Sales - Are sales increasing year on year? Look for 10% per year.

• Expenses - Do expenses increase, and if so, why? Does it stand out? Compare increase in expenses to increase in sales.

• R&D - How much does company spend on R&D, is it increasing or decreasing year on year?

• P/E - Compare P/E to relevant market indices, company trend over previous 5 years. 
  

• Price to Sales Ratio - compare with peers in the same industry. 
  

• How is the company performing in comparison to the market and other companies in the same sub-sector?
  

For a crash course in value investing, I recommend watching these videos by Sven Carlin.

Apodemus

Sebo, all good pointers for valuing established companies and these should, of course, form the bedrock of due diligence.  But relying on these alone would mean steering clear of many tech stocks, where Intellectual Property assets and alignment with market direction may not be reflected in the existing financial fundamentals, yet hugely affect share price prospects.

Sebo027

Apodemus said:

Sebo, all good pointers for valuing established companies and these should, of course, form the bedrock of due diligence.  But relying on these alone would mean steering clear of many tech stocks, where Intellectual Property assets and alignment with market direction may not be reflected in the existing financial fundamentals, yet hugely affect share price prospects.

Interesting point. Then what to do? I would say in the absence of data to determine which stocks will survive or thrive or die in the market, the alternative would be to "buy the market" if one believes that market direction is to be favourable - i.e. tech ETF?

And then my next thought would be, how to identify a market with favourable direction?