What Are the Best Tips for Analyzing Stocks?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 22 August 2019
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Engaging in the process of stock analysis is important for any investor. There is always the need to conduct this type of analysis, not just before actually purchasing stocks and other types of securities. As part of the ongoing effort to structure a portfolio so the returns are constantly moving the investor closer to his or her financial goals, periodic evaluations aid in making decisions of what to keep and what to sell in favor of more promising holdings. When analyzing stocks for purchase or for retention in the portfolio, it is important to consider factors like the current performance of the shares, the strength of the company issuing those shares, and how projected events in the marketplace are likely to affect the value of those shares in both the short-term and the long-term.

A good place to begin when analyzing stocks is the background and financial stability of the company issuing the stocks. Look into how long the business has been in operation, its place within its industry, and how financially strong the business is in comparison to its competitors. Consider the marketability of the products sold by the business, especially in terms of the potential for those products to become obsolete in the next few years. Ideally, the investor will want to pursue stock options associated with companies that are stable, have the potential for growth, and are not likely to be associated with a dying or shrinking industry type.


As part of the process for analyzing stocks, turn attention to the performance of the stock issues proper. While every stock option experiences some ups and downs as the economy shifts, the goal is to determine if any downward changes in value are minimal, how quickly the stock recovers, and how often the shares actually post a sustained increase in different types of market situations. What the investor will hope to find is a stock option that performs reasonably well in a variety of market conditions, since this indicates that the investment would hold up well no matter what happens in the market in the future.

Along with looking into the issuing company and the performance of the stocks, the process of analyzing stocks also calls for looking at the market and getting some idea of where it will move. This is important, since the investor will want to have some idea of what would happen to the investment when and as those market changes occur. How far to project the activity depends on what the investor plans on doing with the shares. Should the idea be to hold them for a year or so, attention should be focused on the anticipated movement of the market during that period. This will help the investor decide if the projected returns are in line with his or her goals.

Analyzing stocks is all about gathering relevant data and organizing it in a fashion that allows the investor to decide if a particular stock option is right for his or her financial goals. This means that as part of the analysis, the investor should always consider what will be gained from the arrangement. A stock that is ideal for one investor may not be quite as acceptable for another. The data should be complied and reviewed in light of what the investor wished to accomplish, increasing the chances of arriving at the best possible investment decision.



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