Most investors want to enjoy what they earn from the markets.
To do so, their money needs to generate above market returns with low market risk.
That’s Rule No. 1.
One of the best ways to do just that is by studying billionaires like Warren Buffett, Baron Rothschild and Sir John Templeton, and applying their secrets to low priced stocks, we like the ones that trade at less than $10 a share.
That brings us to Rule No. 2 – Ignoring the “Noise.”
All too often, we’re told to ignore 52-week lows because stocks hitting new lows tend to continue making new lows. But that’s not always the case.
In fact, many stocks hitting 52-week lows are there undeservingly. It’s your job to find out which ones hold the most value and the most “bang for your buck.”
To do so, you must begin to understand the underlying nuts and bolts of the stock.
• Where does it sit fundamentally?
• Is the stock overvalued/undervalued based on its price to earnings ratio?
• Is it trading at or below future growth, per its price to earnings growth ratio (PEG)?
• Is the company profitable?
• How does the stock trade in comparison to overall sales?
• Where does the company stand with regards to competition?
• When it comes to this analysis, it’s about earnings. How much is the company making now? How much could it make in the future? Some of the key building blocks to understanding how to value a stock can be found with price to earnings (PE), price to sales (PS), price to book (PB), return on equity (ROE) and price to earnings growth (PEG).
Earnings are the bottom line. Earnings give an indication of future potential. Without earnings, a stock is on life support. This is the lifeblood of any company success.
Rule No. 3 – Only Buy Financially Sound Stocks
The last thing any of us can afford to do is invest in a stock that’s not fundamentally sound, or lacks economic moat, as Warren Buffett frequently speaks of.
Research the statistics of the company thoroughly, including the balance sheet, financials, shares outstanding, trading volume, news flow and the chart shows history as well.
By simply following those very rules, traders have a better shot at generating above-market returns with below market risk. Look to Stealth Stock Trader for more.