Choosing quality stocks requires analytical skills, both fundamental and technical analysis. Many novice investors are trapped in stock transactions based solely on technical analysis and ignore fundamental analysis. Investing only by looking at the ups and downs of stock prices in the stock exchange dashboard is very risky. To help you get the best return on a stock news investment, here are some ways to choose the best stock.
How is the Market Capitalization? Is Liquidity Stock Included?
The first step in choosing good stocks is to pay attention to market capitalization. For information, market capitalization is the share price multiplied by the total number of shares issued by the issuer. Market capitalization is important to look at because:
It can provide information related to how high the stock price volatility.
Knowing how much public ownership in the issuer.
Seeing the company’s potential going forward.
In addition, it is also necessary to find out the nature of the shares themselves. Is it fairly liquid, sufficiently liquid, or less liquid? A good stock is a stock that is liquid. Why? Because these shares are traded at a higher frequency or above the minimum frequency limit that has been determined. It’s useless the value of capital is large but less liquid. So, look for stocks with large capitalization and fairly liquid nature.
Observe the Revenue, Profit, and Margin
What about the company’s financial statements contained in the capital market dashboard? To choose quality stocks, it is necessary to observe the income, profit, and margin.
Check income and net income for the past two years.
Check the comparison of earnings in the quarterly report (quarter I with quarter II) and annual report (last three years).
Pay attention to the price to sales (P / S) ratio and the price to earnings (P / E) ratio.
Watch for the latest trends whether growth is volatile or consistent. Or if there is a big change (more than 50% in a year) towards the top or bottom.
Also check the company margins whether the trends are generally up, down, or remain the same.