Top 10 Important points to buy a stock:
I was looking for information to buy some stocks in this COVID-19 time as I hear from my friends that this is the time to buy some stocks. I wanted to understand how to choose a stock and I came with some points.
1) Going Concern principle : This principle will help us to understand the business whether it will close or withstand its business even in case of any unpredictable situations.
https://www.accountingtools.com/articles/2017/5/14/the-going-concern-principle
2) Intra day price more than 10$ - reason being not all can buy or sell. Intra day refers mainly with price movements over a course of time.
https://investinganswers.com/dictionary/i/intraday
3) Per day volume - more than 100K+ volume per day -it is also known as Average Daily Trading Volume (ADTV) "Many traders and investors prefer higher average daily trading volume compared to low trading volume, because with high volume it is easier to get into and out positions. Low volume assets have fewer buyers and sellers, and therefore it may be harder to enter or exit at a desired price." reference : https://www.investopedia.com/terms/a/averagedailytradingvolume.asp
4) Market Capitalization should be billion $ plus .. Means "number of shares" X price of the share should be billion + "Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share. " reference : https://www.investopedia.com/terms/m/marketcapitalization.asp
5) Beta Value to be less than 2 - reason if it is 2 means it is volatile in conjunction with market - "Beta is a measure of a stock's volatility in relation to the overall market." If a stock falls or raise with the same amount in conjunction with the market then the Beta value will be 1. If it is less than 1, it is not bothered about the market changes, which is good. If it is more than 1 that means it is too volatile and try to stay away from the stock.
reference : https://www.investopedia.com/investing/beta-know-risk/
6) Earnings per share should be positive (EPS) > 0 - Earnings per share (EPS) is the company's profit over outstanding shares. The result indicates the company's profitability. The higher a company's EPS, the more profitable it is considered.
https://www.investopedia.com/terms/e/eps.asp
7) Assets vs Liability - should always be positive. Look at the Balance sheet, Income statement and Profit and Loss account of the company. This should be available in any of the stock site like Finance.Yahoo.com or finance.google.com
8) Look for Cash flow. Cash flow can be a measure for the stock's financial strength. Free cash flow also provide some information about the amount of cash that a company actually generates during the time period.
https://www.investopedia.com/terms/c/cashflowpershare.asp
9) Sector the stock belongs to. Make sure you understand the sector the stock you are planning to buy.
10) High P/E ratio. "The average P/E for the S&P 500 has historically ranged from 13 to 15. For example, a company with a current P/E of 25, above the S&P average, trades at 25 times earnings. The high multiple indicates that investors expect higher growth from the company compared to the overall market."
Please let me know if you have any other suggestions that I can read about as well in the comments.
1) Going Concern principle : This principle will help us to understand the business whether it will close or withstand its business even in case of any unpredictable situations.
https://www.accountingtools.com/articles/2017/5/14/the-going-concern-principle
2) Intra day price more than 10$ - reason being not all can buy or sell. Intra day refers mainly with price movements over a course of time.
https://investinganswers.com/dictionary/i/intraday
3) Per day volume - more than 100K+ volume per day -it is also known as Average Daily Trading Volume (ADTV) "Many traders and investors prefer higher average daily trading volume compared to low trading volume, because with high volume it is easier to get into and out positions. Low volume assets have fewer buyers and sellers, and therefore it may be harder to enter or exit at a desired price." reference : https://www.investopedia.com/terms/a/averagedailytradingvolume.asp
4) Market Capitalization should be billion $ plus .. Means "number of shares" X price of the share should be billion + "Commonly referred to as "market cap," it is calculated by multiplying the total number of a company's outstanding shares by the current market price of one share. " reference : https://www.investopedia.com/terms/m/marketcapitalization.asp
5) Beta Value to be less than 2 - reason if it is 2 means it is volatile in conjunction with market - "Beta is a measure of a stock's volatility in relation to the overall market." If a stock falls or raise with the same amount in conjunction with the market then the Beta value will be 1. If it is less than 1, it is not bothered about the market changes, which is good. If it is more than 1 that means it is too volatile and try to stay away from the stock.
reference : https://www.investopedia.com/investing/beta-know-risk/
6) Earnings per share should be positive (EPS) > 0 - Earnings per share (EPS) is the company's profit over outstanding shares. The result indicates the company's profitability. The higher a company's EPS, the more profitable it is considered.
https://www.investopedia.com/terms/e/eps.asp
7) Assets vs Liability - should always be positive. Look at the Balance sheet, Income statement and Profit and Loss account of the company. This should be available in any of the stock site like Finance.Yahoo.com or finance.google.com
8) Look for Cash flow. Cash flow can be a measure for the stock's financial strength. Free cash flow also provide some information about the amount of cash that a company actually generates during the time period.
https://www.investopedia.com/terms/c/cashflowpershare.asp
9) Sector the stock belongs to. Make sure you understand the sector the stock you are planning to buy.
10) High P/E ratio. "The average P/E for the S&P 500 has historically ranged from 13 to 15. For example, a company with a current P/E of 25, above the S&P average, trades at 25 times earnings. The high multiple indicates that investors expect higher growth from the company compared to the overall market."
Please let me know if you have any other suggestions that I can read about as well in the comments.
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