How to Research Stocks in 5 Easy Steps

Research Stocks
Research Stocks

Researching stocks is the first step towards learning the share market movements and building a fortune for yourself. Once you learn to analyze the nature of stocks, you can certainly minimize your risk levels and earn higher returns. That’s why it is suggested that you form an efficient research strategy for stock trading and use professional tools for analyzing stocks.

If you are a beginner in stock trading, then adding a tool like Stock Rover can help you in better understating the trade and searching right stocks for you. Stock Rover is a highly efficient market research platform that comes with a wide selection of easy-to-use features and allows you to analyze market data, screen for potential trades, set up to track holdings, and follow your favorite stocks. Another great service is called Motley Fool Rule Breakers, that is a stock-picking service that focuses on stocks with explosive growth potential. You can find the Motley Fool Rule Breakers Review here.

Now, if you are starting your investment journey, here are the four simple steps to research the right stocks for you –

1. Understand the types of Stock Analysis

The first step toward any stock analysis is to select an analysis strategy to decide the best route for you. In general, there are two types of stock analysis-

A. Fundamental Analysis

This type of analysis involves researching the most important details about the company and forming an idea about its future performance. It includes examining elements such as earnings per share, price to earnings ratio, etc.

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B: Technical analysis

When you go for technical analysis of a company, you investigate its data based on relevant market activities such as trading volumes so that you can assume the future stock’s price. In this sort of analysis, you have to use appropriate tools, charts, and trends to estimate the future stock price movements.

Research Stocks

2. Start the Company’s Research

All the information about a publicly traded company is available online, and to conduct your stock research, all you have to do is look into certain factors about the company.

  • 10-K – It is an annually published report that includes financial data of the company for the past five years, all the information about the company’s earnings, its balance sheet, risk factors, and details of the company’s administration.
  • 10-Q – It is a quarterly filed form that gives you access to unaudited financial statements and helps you comprehend the company’s financial management.
  • Net income – A company’s net income lets you know if it is making a profit or loss in the market.
  • Price-to-earnings (P/E) ratio: It is calculated by dividing the market value of a share by the earnings per share, and it helps you understand the company’s financial position.
  • Return on equity: The company’s return on equity informs you about how it uses its investors’ money and what returns it provides to its shareholders.

3. Know the Company (qualitative research)

The next step is to conduct thorough qualitative research of the company, and for this purpose, you should focus on the following elements –

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Leadership: When you research a company, never forget to check its top management. Once you find the top leaders, analyze their past decisions and business management styles, etc. In this way, you will know the future direction of the firm and its management practices.

Company values: Once you are done with the analytical research, it is helpful to check the values and ethics of the company, such as its mission, business practices, etc. You can check news articles about the company and make sure that it doesn’t work against a cause you support, such as if you are a vegan and the company harms animals in its production. This way, you will be ensured that you are not investing your money in a cause you don’t want to grow.

4. Consult with Research Tools

If you are a beginner, it is recommended that you consult with an experienced broker or some research software before investing. For example, you can go for a powerful research tool such as Stock Rover to understand everything about suitable stocks for you or consult an experienced trader.

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