4 Criteria for Choosing a Strong Stock During a Downturn
Which is the best advice you ever received when come to stock trading?
For me, the best stock trading advice I ever receive was to buy stocks based on a set of criteria. My mentor gave me this set of guidelines to help me in choosing strong stocks. Stocks that can withstand recession and grow in the long term.
Let's us look at the 4 important criteria of selecting a good stock.
1) Source of Cashflow
Cash flow is the lifeline of every companies. No cash, no business and the stock crash. Thus it is important you identify the source where the companies generate its cash flow. Is that source reliable? Will it fall drastically during recession?
2) Is the Earnings Growth Increasing Yearly?
You are generally buying stock for the long term. Thus it is important that the company current earnings are increasing year over year. Is the company usually exceeding the analysts' expectations? Investors love to invest based on the company earnings potential. Therefore stocks with high earnings growth will make the most profits for you.
3) Is the Debt Level healthy?
Warren Buffet never buys a stock with a high debt level. This is because such companies can go bust easily. You should also inspect the cash flow level. It should be positive and slowly increasing. This means you are investing in a healthy company that knows how to manage their money.
4) Are Management Strong,Capable and Creative?
The company should have an imaginative and experienced management team. Look at GOOGLE, they have expanded into a multi-billion company. They have no debt and having plenty of cash. This is the result of a capable and creative management.
These was the 4 main stock trading advice that I use till now. The great investors used them as well. You will eliminate a lot of bad stocks just with these 4 simple trading advices.
About the Author:
Stock Trading can be very profitable if you understand the mechanics. I am currently using this trading system to help me make good profits. You can take a peek at http://www.forex-trading-study.com/clickhere/stock-trading-system.php