Harry Domash's Winning Investing

Six Tools For Picking Better Stocks

Do You want to improve your stock picking skills?

Here are six factors that you could use to qualify stock that you’re considering.

All are available free. Five from Zacks (www.zacks.com), and the sixth from Louis Navellier’s Portfolio Grader (https:bit.ly/NavPortGrader).  Start with Zacks.

Got EPS Growth?

Earning per share growth is the most important single factor affecting future share price growth prospects.

Using Zacks, enter a ticker symbol and look for expected annual EPS growth (Exp EPS Growth) in the “Key Earnings Data” section on Zack’s homepage. Look for stocks with at least 10% expected annual growth, but, higher is better.

Trading Volume

Stocks go up when mutual funds and other institutional buyers pile in. However, since they’re buying hundreds of thousands of shares at a time, these big players need high trading volume stocks.

Look for stocks with at least 250,000 shares trading daily, and those trading more than one million shares daily are your best bests. You can see the average trading volume in the Quote Overview section on Zack’s homepage.

Avoid Overpriced Stocks

All too often, by the time we hear about a stock, we’re too late to the party. That’s why paying attention to valuation is important. Although the price/earnings ratio (P/E) is the most popular valuation gauge, price/sales (P/S), which compares share price to the last 12-months per-share sales instead of earnings, is more reliable.

You can see the price/sales ratio in the Fundamental Ratios section of Zacks Full Company Report page. Stick with P/S values between three and five if you’re looking for growth stocks, or below two if you want to invest in beaten-down value stocks.

Got Cash Flow

“Operating cash flow” is simply the cash that flowed into, or out of, a firm’s bank accounts resulting from its basic operations. It’s much harder to fudge cash flow numbers than reported earnings, which are subject to all sorts of manipulation. What’s important is that cash flow be positive, the amount doesn’t matter.

Find the “Price/Cash Flow?” just above “Price/Sales” in Zacks’ Full Company Report section. Require a positive number. The value isn’t significant.

Get Noticed

Your stock’s great growth numbers will go unrewarded if nobody notices. Stock analyst reports are how many investors, especially institutional buyers, learn about a stock. Thus, sufficient analyst coverage is necessary.

To see the number of analysts following a stock, select Zacks’ Detailed Earnings Estimates report and scroll down to the earnings estimates section. Require at least four analysts and more is better.   

Strong Fundamentals

You’ll always do best by focusing on stocks with solid fundamentals, which includes items such as profitability, financial strength, debt, etc. Rather than analyzing all that on your own, growth stock guru Louis Navellier will do the heavy lifting for you.

Simply enter your stock’s ticker into his Portfolio Grader (https://bit.ly/NavPortGrader) and pay the most attention to the Fundamental grade. Stick with stocks graded A, B, or C.

These tips will help you pick better stocks, but following them doesn’t necessarily mean that you’ll make money. You still need to do your due diligence. The more you know about your stocks, the better your results.

published 2/14/23

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