Yesterday we talked about the Stock Market jitters and, if they were justified?

Today we will look at some important factors in finding a GOOD, QUALITY STOCK.

(Note: for those curious, I have been an active investor in the Stock Market for over 20 years and have subscribed to the famous VALUELINE INVESTMENT SURVEY for over 14 years. VL incredibly charts over 2200 stocks , 4 different times a year. The charts are full of about 30 variable of information. Highly recommended for any serious investor).

The following important factors are in no certain order with the exception of EARNINGS. I have found that it is the single most important factor in driving a stock's price. If the earnings keep increasing every year, sooner or later, the stock will usually follow somewhat.

1.) EARNINGS( earnings per share)....look for a company whose earnings are increasing each year( or say 9 out of 10 or 13 of last 15yrs). As stated above, this is probably the most significant factor of a stock price rising.
2.) CASH FLOW.…I have found increased cash flow to also be important in driving a stock price north.
3.) DIVIDEND INCREASES…. generally a good thing. If the company is increasing their dividends on a yearly/ regularly basis, good for you and shows confidence in future growth by the people in charge.
4.) FINANCIAL STRENGTH…. obviously good to have good assets and little/no debt. Less debt, less interest owed, more room for acquisitions, growth, and even weathering a tough economic time.
5.) SHARE BUYBACKS…. in general if the company is buying its own stock shares back, its saying that it’s a good investment at that price( ie they think it may be a bargain). It also improves the EARNINGS per share ( #1 above).
6.) DIVIDEND YIELD....this is what the company pays you annually just for owning the stock. Ex: Sherwin Williams( the paint company)pays almost a 3% yield. If you owed $2000 worth of stock, they would pay you $60 a year just for owning the stock, whether the price goes up or down. A high yield is like a bonus for owning the stock.
7.) PROJECTED GROWTH..What is it. I like to see vcompanies that will increase earnings by 10-20% a year and if the earnings double in 5 years, that is pretty exciting, and usually good for the stock price
8.) WHAT IS THE STORY? Does is make common sense? Many of the home building companies are currently being hurt by the slower housing sales. Many companies are being hurt by the rising gas prices. Some environmentally GREEN companies are doing great. If every kid is buying NORTH FACE clothing, you can bet sooner or later that will POSITIVELY AFFECT the sales and the earnings. Look around, and pay attention to what trends are happening and what is hot!

These are just of the few main factors that affect a stock’s price. The bottom line is that some companies are still doing great things and increasing their earning all the time, despite all the negative media and other factors going on.

Here’s an interesting thought:: no one really knows why other people sell. They may have a cash crunch, may be taking a profit, may be scared, etc etc. So YOU may be selling because everyone else is selling, yet no one knows WHY others are SELLING(the old, follow the cattle deal). Does that make sense to do??

If you have a company with increasing earnings, good cash flow, increasing dividends, good financial strength, with good assets and low debt, buying back shares, good yield, good projected growth and a story that you think makes sense… why sell it just because the market is in a bit of a slump?? Perhaps it’s time to buy more? Maybe, just maybe it is on SALE???

Remember, if more people are BUYING.. the market generally goes up. We control this with our buying and selling decisions.

A final note is to do some homework, and a good financial broker/advisor is not a bad thing to have as well. If you have questions, I can share whatknowledge I ve acquired with you as well.

Happy Investing

Author's Bio: 

T A Smith is the founder and creator of Smile
A graduate of UMASS, Amherst.
Former Dale Carnegie graduate.
Smith loves to golf,ski,read,walk his chocolate labs,and listen to jazz and country music.
Smith's motto: Work hard, have fun,help others,and make people SMILE.