Skip to main content

What is the Best Stock to Spend In?

If you're like the majority of stock market investors you have struggled with finding the best stocks to invest in.

There are several approaches to find a very good stocks to invest in. But first you need to choose what method works best for you.

Basically you can find two main kinds of stock market investing

1. Buying growth stocks

2. Buying value stocks

Growth stocks are companies which are growing fast in earnings. There are always a large amount of advanced and medical growth stocks.

Value stocks are stocks which are undervalued because they trade at a cheap set alongside the company's fundamentals (i.e. earnings, dividends, sales etc...)

Growth stocks generally will fatten your banking account faster but there is more risk whereas value stocks will generally grow at a slower more sustainable pace but probably won't offer you ulcers.

Here's what some investors search for in a growth stock (based on my knowledge of the National Association of Investors Corporation (NAIC) criteria):

1. Strong Earnings Growth - either quarter to quarter or year over year

2. Strong Forward Earnings Growth - analysts estimate what earnings is going to be for the next quarter or year, should they estimate growth that's a plus.

3. Profit margins - you'd prefer the business to be making a considerable amount of profit to sustain further growth

4. Return On Equity (ROE) - search for growth in ROE or a well balanced ROE

5. Doubling in 5 years or less - you'd choose the stock to double in 5 years - look at what the analysts estimate for price potential.

Also here's what some value investors search for:

1. Shares price below intrinsic value

2. Low Price to Earnings (P/E) ratios

3. Price to Earnings Growth (PEG) ratio below 1 is good

4. Stock price is less than tangible book value

5. A debt to equity ratio below 1

6. The company's assets should be more compared to the company's liabilities by at least an issue of 2

7. Dividend Yield within 1/3 of the quantity of the AAA bond yield

8. Earnings growth of at least 7% a year for the past 10 years

You can find a variety of other ways to find a very good stock to buy but this will give you a starting point