Analyzing Stocks for Beginners in 2020
Analyzing stocks or stocks analysis is a process requiring you to do your own research. But researching is a tedious process for many investors.
However, stocks analysis and research are always better than going in blindly, not knowing what to expect from the market.
This article will help you become your very own stock analyst. Get Wibest Brokers List on our website
What will you Analyze?
To come up with a conclusion about a stock, you should know what you are looking at and what you are analyzing.
There are various steps in stock analysis. Usually, you start with an industry and then find a winning company. Learn about the outlook of the industry and the company.
It’s up to you which one you want to tackle first. What’s important is the process flows smoothly.
Analyzing the Industry
Sources of information are available for almost any industry.
Usually, the annual report of a company itself provides a good enough overview of the industry, along with its future growth.
Annual reports also tell something about competitors within an industry. Reading the reports of two or three companies should offer a clearer picture of the industry.
You can also use the internet to your advantage. Subscribe to different websites and online magazines that specialize in the industry you’re tracking.
Analyzing the Business Model
Focus on a company’s strengths and weaknesses. You can sometimes find a strong company in a weak industry and a weak company in a strong industry.
The company’s strengths are usually reflected on its brand identity, products or services, customers, and even suppliers.
Again, you can learn about the company’s model from its annual reports, websites, and trade magazines.
Analyzing the Financial Status
Even if you hate math to the bone, you must understand the financial strength of a company. It’s one of the most crucial steps in analysis.
You cannot actually think like an analyst if you don’t understand the company’s financials.
The reason is this: numbers more often speak louder than sugarcoated words on an annual report. If you don’t like numbers and you want to become your own analyst, you must start learning about them right now.
Analyzing the Quality of the Management
Management quality is another crucial factor for stock analysis.
Some investors even subscribe to the notion that there’s no good or bad companies, only good or bad managers.
The top executives are responsible for the future of the company. You can evaluate the company’s management and board quality by conducting some research on the internet.
Analysis of Growth
Stock prices move according to earnings. Therefore, knowing where the future earnings are going means knowing where the stock price is going.
However, there’s really no single formula telling you what to expect for future earnings. Analysts come up with their estimates by scrutinizing past figures of sale growth and profit margins.
Other words, they are connecting what happened in the past to the possible scenarios of the future.
The ultimate test for your stock analysis prowess is making accurate enough earnings forecasts. That’s a great indication that you understand the industry and the company. Wibest Broker Education is one of the most important things to get in this business.