Which Is A Good Buy?
While there are no guarantees that a company's stock will be
a good buy, there are good indicators to look for though. Here are just some of
the common ones:
Good track record: This company almost always had positive news releases, for a mining company,
you'd be looking for repeated discoveries (preferably a record of always
discovering more than expectations)
Earnings (EPS): This company consistently beat analysts' expectations of EPS, whether it's
quarterly figures or annually that you're after, your online broker's research
tool should show this unless you are using a heavily discounted broker.
Good innovations: This company has an upcoming product that will rock the market and it isn't a
fad. The product or service is one that will likely survive the long haul and
rake in lots of profits for the company.
Improvements: A history of improving operating efficiencies, see management commentary (in
the MD&A of an annual report) which explains their results for the period.
This section generally will say if they had improved their efficiencies.
Dividends: Management will generally increase dividends only if they foresee an increase
to profit level for an extended period of time into the future. The reason is
that any decrease in ordinary dividends signals poor profitability and
confidence in future operations, therefore management generally avoids
decreasing it at all cost because it will drive share price downwards (even if
it means they have to borrow money to pay dividends). In other words,
management does not take the decision to increase dividends lightly. If they
increase it, it's because they think they can sustain it for a long period of
time. This signals future company growth and it's definitely what you want to
see in any company you invest in (unless you're "shorting" a stock,
aka. "short selling" see next tip for more info).
I am sure there are more indicators to look for, but for now
that's all I can think of. Stay tuned for the next stock tip! Maybe I will give
more indicators in the future, maybe
I can even have my CFA buddy chime in actually...just a thought for now ;)
-TT
