10,000 plus stocks – countless stock picks strategies, stock picks newsletters, market stock picking gurus, stock picks software.

How does a trader find out the best stock market picks to trade? Where do you look?

Stock Picks Checklist

1.  Secret Stock Market Tip

“Go With Where the Elephants Go” The multi-billion dollar funds move stocks and cause them to double or triple. What do these groups need to have a trade/investment qualify to be a stock market pick?

  • Earnings Surprises are money managers’ favorite factor.  An earnings surprise is when reported earnings beat forecasts Many investors believe that surprises come in bunches.  Positive earnings surprise usually come in groups and the stocks tend to continue to rise for many months and vice versa for Negative earnings surprises.
  • Analysts Raising Estimates -  When an analysts significantly increases their forecasts a stock usually continues up for quite a while and down when they lower earnings forecasts.
  • Accelerating Earnings Growth is a huge factor for the big boys to consider a trade to be a stock market pick.  If a company which usually has earnings at 15% then has earnings grow to 30%. then earnings has positive momentum. Price-to-book value compares the recent stock price to shareholders’ equity, which is called book value when calculated on a per-share basis. Should be under 15.
  • Price-to-cash-flow ratio compares the recent stock price to a company’s per-share operating cash flow. Should be under 35.
  • Price-to-earnings-growth ratio compares the P/E ratio to forecast earnings growth. PEG ratios below one signal undervalued stocks and those with PEGs above 2 are overvalued.
  • ROE- return on equity measures profitability by comparing the net after-tax income to shareholders equity.  Big funds won’t consider a stock maker pick  with a ROEs below 15%.

2.   Secret Stock Market Pick – CANSLIM

CAN SLIM is the method developed by William O’Neil, the co-founder of Investor’s Business Daily for screening, buying and selling stock.  His book  “How to Make Money in Stocks” is an indispensible source of knowledge.
CAN SLIM has Seven Criteria:

  1. C = Current quarterly earnings per share – Earnings must be up 18-20%.
  2. A = Annual earnings per share – Annual EPS show significant growth for the last five years.
  3. N = New things – Buy companies with new products, new management, or significant new changes in industry conditions. Most importantly, buy stocks when they start to hit new price highs. Forget cheap stocks; they are that because no one wants them.
  4. S = Shares outstanding – We want a small number. We don’t want older companies with large capitalizations and no potential for huge growth.
  5. L = Leaders – Buy market leaders not laggards.
  6. I = Institutional sponsorship – We want stocks that have institutional sponsors with above average track records.
  7. M = General market –Determine the market’s overall current trend, analyze the market indexes for any noticeable  price and volume changes. Finally, look at how the market leaders are performing.

CAN SLIM is a one stop shop for traders/investors as it combines value, growth, fundamental strategies and some technical analysis.  These strict guidelines limit  the possibilities of bad trades due to errors caused by emotion and lack of a trading plan.

3.   Secret Stock Market Pick – Dogs of the Dow

Dogs Of The Dow is an investing strategy formulated in 1972 and is very successful. Each year an investor buys the 10 DJIA (Dow Jones Industrial Average) stocks with the highest dividend yield at the beginning of the year. From 1973 and 1996 Dogs of the Dow returned 20.3% annually, whereas the Dows averaged 15.8%. 1957 to 2003, the Dogs outperformed the Dow by about 3%, with a rate of return of 14.3% annually when the Dow averaged 11%.

4. Secret Stock Market – Pick Stocks Like Peter Lynch

Peter Lynch turned the $20 million Fidelity Magellan in 1977 into the largest mutual fund in the world. Lynch felt individual investors had the advantage over large institutions because the large firms either wouldn’t or couldn’t invest in smaller-cap companies that had yet to experience the explosive that would come once they were discovered by analysts and mutual funds.

5. Only Buy What You Understand

According to Lynch, our greatest stock research tools are our eyes, ears and common sense. Lynch was proud of the fact that many of his great stock ideas were discovered while walking through the grocery store or chatting casually with friends and family.

6. Lynch’s Fundamental Values for stock market :

  • Percentage of Sales: Your favorite product or service must comprise a significant part of the companies sales to have an impact on a company’s success.
  • PEG Ratio: Buy companies with strong earnings growth and reasonable valuations.
  • Favor companies with a strong cash position and below-average debt-to-equity ratios. Strong cash flows and prudent management.