Stock Selection Strategies
Conclusion
Let's run through a quick recap of the foundational
concepts that we covered in our look at the most well-known
stock-picking strategies and techniques:
- Most of the strategies discussed in this
tutorial use the tools and techniques of fundamental analysis
, whose main objective is to find the worth of a company,
or its intrinsic value .
- In quantitative analysis , a company is
worth the sum of its discounted cash flows . In other words,
it is worth all of its future profits added together.
- Some qualitative factors affecting the
value of a company are its management, business model ,
industry , and brand name.
- Value investors , concerned with the present,
look for stocks selling at a price that is lower than the
estimated worth of the company, as reflected by its fundamentals.
- Growth investors are concerned with the
future, buying companies that may be trading higher than
their intrinsic worth but show the potential to grow and
one day exceed their current valuations .
- The GARP strategy is a combination of
both growth and value: investors concerned with 'growth
at a reasonable price' look for companies that are somewhat
undervalued given their growth potential.
- Income investors, seeking a steady stream
of income from their stocks, look for solid companies that
pay a high but sustainable dividend yield .
- CANSLIM analyzes these factors of companies:
current earnings, annual earnings, new changes, supply and
demand, leadership in industry, institutional sponsorship,
and market direction.
- Dogs of the Dow are the 10 of the 30 companies
in the Dow Jones Industrial Average (DJIA) that have the
highest dividend yield.
- Technical analysis , the polar opposite
of fundamental analysis, is not concerned with a stock's
intrinsic value, but instead looks at past market activity
to determine future price movements.
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