Which stocks should i buy

For example, you might note that the emerging markets nations are producing new middle classes made up of people who demand a greater variety of consumer goods. As a result, there will be a surge in demand for certain products and commodities. Taking the argument a step further, the investor can deduce that with an increase in the demand for a product, some producers of that product will prosper. This type of basic analysis forms the "story" behind the investment, which justifies purchasing a stock.

At the same time, it's important to be critical of your own assumptions and theories. You may love doughnuts and fast cars, but that doesn't mean that the newly affluent of Southeast Asia are clamoring for them too. Once you are comfortable and convinced of the general argument after performing this form of qualitative research, corporate press releases and investor presentation reports are a good place for continued analysis. The next stage in the stock-picking process involves identifying companies.

There are three simple ways to do it:. These three methods are by no means the only ways to pick a company, but they do offer an easy starting point. There are also clear advantages and disadvantages associated with each strategy that investors should consider.

Seeking out expert opinions via news sources is time-consuming but it can yield results. It will deepen your understanding of the industry fundamentals. It also may alert you to interesting smaller companies that don't turn up on screeners or within ETF holdings. Once you are convinced that the industry that interests you is a solid investment and you are familiar with the major players, it is time to turn your attention to investor presentations. They are less comprehensive than financial statements , but they provide a general overview of how firms make their money and are easier to absorb than Q and K reports.

These reports also will have forward-looking information on the expected direction of the company and its industry. Browsing company websites and presentations help you refine your search. The process involves more in-depth scrutiny of a specific company to see whether it might outperform its competitors in the industry. At the end of your research process, you may be left with a single investment prospect or a list of ten or more companies.

Or you may decide that this industry is not right for you. That's fine. All of that research may have stopped you from making a bad investment. Knowing when to say no is an essential aspect of the art of picking stocks.

You may be ready to pull the trigger, or you may act like a financial industry pro and conduct an in-depth financial statement analysis.

Portfolio Management. Stock Market Basics. Stock Market. Industries to Invest In. Getting Started. Planning for Retirement. Retired: What Now? Personal Finance. Credit Cards. About Us. Who Is the Motley Fool? Fool Podcasts. New Ventures. Search Search:. James Brumley TMFjbrumley. Nov 10, at AM. Author Bio James Brumley is former stockbroker with a large Wall Street firm, and a former trading analyst for a small, options-based newsletter. Unlike value stocks , high-growth stocks tend to be more expensive than the average stock in terms of metrics like price-to-earnings , price-to-sales , and price-to-free-cash-flow ratios.

Yet, despite their premium price tags, the best growth stocks can still deliver fortune-creating returns to investors as they fulfill their awesome growth potential. Growth stocks are companies that increase their revenue and earnings faster than the average business in their industry or the market as a whole.

To provide you with some examples, here are 10 excellent growth stocks available in the stock market today:. Data sources: Morningstar, company quarterly financial reports. As this list shows, growth stocks come in all shapes and sizes. They can be found in a variety of industries, both within the U. In fact, while all the stocks on this list are larger businesses, smaller companies can be fertile ground for growth investors, too.

An annual expense ratio of 0. Companies that can capitalize on powerful long-term trends can increase their sales and profits for many years, generating wealth for their shareholders along the way. The coronavirus pandemic accelerated many trends that were already well underway. Here are some examples, along with the companies that can help you profit from those trends:. The key is to try to invest in these types of trends and companies as early as possible.

The earlier you get in, the more you stand to profit. However, the most powerful trends can last for many years and even decades, giving you plenty of time to claim your share of the profits they create. Otherwise their competitors may pass them by, and their growth may not last long. Industry reports from research firms like Gartner NYSE:IT and eMarketer -- which provide estimates of industry sizes, projections for growth, and market share figures -- can be very helpful in this regard.

The larger the opportunity, the larger a business can ultimately become. And, the earlier in its growth cycle it is, the longer it can continue to grow at an impressive rate.

The Motley Fool got the chance to chat with several growth investing experts. Here's what they had to say. Preston D. The Motley Fool: What's your best advice on finding high potential stocks like growth stocks? Cherry: Because growth stocks tend to operate in a growth business cycle or business sector, finding high potential growth stocks should contain metrics that attempt to confirm or support current growth and best signal sustainable growth patterns.

One important feature of a growth company is to ask, "do they possess a unique business service or product in their sector that provides a valuable moat? Performance metrics to consider are whether the company shows historical increases in earnings over select periods and profit margin analysis, which illustrates how a company can manage costs and increase revenues.

Other analysis considerations are the technical chart trend characteristics and experienced market analysts' forward growth and price projections. Cherry: Investing in individual stocks, in general, contains risk factors such as overall market risk and business risk, among others.

The characteristics of growth stocks can make them riskier than their value stock counterparts. As their name suggests, growth stock companies tend to be in a growing business phase. The growing stage could consist of younger and smaller companies with an unproven product or entity track record that tend to use much of their revenues and raised capital to grow the business.

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