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| The Basics | Find great stocks in 2 minutes or less
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Between the Web, TV, market gurus and market-minded friends, it's easy enough to find dozens of stock tips. Here's how to pick out the best -- in a flash.
By Harry Domash
Do you usually research one or two stocks at a time? If so, youd do better if you tackled a whole bunch at once, say 10 to 20.
Heres why: The more stocks you have to choose from, the better your chances of picking a strong candidate.
But few of us have the time to analyze 10 or 20 stocks in depth. The key is to eliminate the dogs as soon as possible so you can spend your time researching the best candidates.
Here are nine checks for differentiating the worthwhile candidates from the duds. Using these checks, you can separate the wheat from the chaff in less than two minutes per stock (no kidding). You wont need a calculator and all but one of the checks can be done using just one report, MSN Moneys Company Report.
Too many ideas? No such thing
Where do you find 10 to 20 stocks to analyze? Screening is one way. Here are a few MSN Money has put together. But you probably already get plenty of tips from TV gurus, magazines, and people at the gym. The more the better. Take them all. With these checks, you can quickly spot and discard the stupid ideas.
Ill demonstrate the process using a list of 15 stocks of different-sized companies and from a variety of industries. I chose the list to be representative of the types of stocks you are likely to encounter every day.
| | | Company, Symbol | Company, Symbol | | 7-Eleven (SE, news, msgs) | Lowes Companies (LOW, news, msgs) | | AmerUs Group (AMH, news, msgs) | Pharmaceutical Product Development (PPDI, news, msgs) | | AnnTaylor Stores (ANN, news, msgs) | Schmitt Industries (SMIT, news, msgs) | | Charles Schwab (SCH, news, msgs) | St. Jude Medical (STJ, news, msgs) | | Cisco Systems (CSCO, news, msgs) | Texas Instruments (TXN, news, msgs) | | Coach (COH, news, msgs) | ThermoView Industries (THV, news, msgs) | | Education Management (EDMC, news, msgs) | Yahoo! (YHOO, news, msgs) | | Hovnanian Enterprises (HOV, news, msgs) | |
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Remember, eliminate weak candidates as soon as possible. Disqualify a stock as soon as it flunks one test.
Avoid weak industries
Stocks in the same industry tend to move together. Even if you pick a great company, youre likely to lose money if the market sours on its industrys prospects.
Related news and commentary on MSN Money
How do you know which industries to avoid? MSN Moneys Industry Winners/Losers report is a good place to start. The report lists the 10 best-performing and 10 worst-performing industries, in terms of stock price changes, over the past month.
- Check #1: Avoid stocks in industries listed on MSN Moneys 10 worst list. When I looked, the residential-construction industry was one of the 10 worst, ruling out homebuilder Hovnanian Enterprises.
These pennies aren't from heaven
Penny stocks are stocks trading below $1 per share. I know, those stocks are fun. After all, you could turn $100 into $10,000 if you bought 200 shares of a 50 cent stock that eventually went to $50.
But, alas, that doesnt happen very often. Cheap stocks are cheap for good reason. At least in my experience, theyre much more likely to go down than up.
- Check #2: Discard stocks changing hands for less than $1 per share. That test ruled out replacement window-and-door maker ThermoView Industries, which, when I looked, could be had for less than 50 cents per share.
Real companies have real sales
If you use e-mail, youve probably received messages touting stocks with great stories. They may have a cure for cancer, a miracle battery that will power automobiles for days without recharging or a hot new homeland-security product.
Unfortunately, those stories are just stories unless they translate into meaningful sales. Most publicly traded companies generate annual sales (revenues) measured in the hundreds of millions, if not billions, of dollars. At the very least, a real company with real products ought to generate sales of $10 million per quarter or $40 million per year.
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