How do you choose which stocks to buy? Can you give me a summary? – Geri

Hi Geri, great question!

Here is a summary of how I choose which stocks to buy.

1. First, I run the BTMA Stock Analyzer.
2. Next, I choose stocks that are highlighted in yellow “possible buys” or green “recommended buys”.
3. In order to invest in one of these companies, I must know about the company. If I don’t know about the company, then I won’t invest in it.
   You’re usually better to stick with the big name companies that you know of.
   If you’re not sure about whether you should invest in something, then you can use the BTMA Stock Analyzer “Qualitative Analysis” section. It will ask you questions to help you decide which stock to buy.
4. These are some of the basic questions that I ask myself before I invest in a company. These are some of the basic questions that Warren Buffett also asks:
   “Do I know of this company?”
   “Do I understand the business of this company?”
   “Would I be willing to hold this company for 10 years?”
   “Does it have a unique competitive advantage?” or “Does it offer the lowest prices among its competitors?”
5. After narrowing down my choices by asking the questions above, I may further eliminate choices by looking at a 2-year chart of the stock’s performance to see where today’s price compares to the past 2 years of price performance. Yahoo Finance has good 2-year charts. I usually try to buy a stock when it is at a low point. Ideally when there was a sudden price decline caused by some temporary issue that will not seriously affect the company for the long term.
6. Some other things to consider are the company’s long term debt to equity ratio. You want to make sure that the company doesn’t have too much debt and that they are not drastically increasing their debt.
7. It is also a good idea to make sure that the company you are about to invest in isn’t involved in some huge lawsuit or a major catastrophe or restructuring of the company that will totally change the products and services of the company.

After doing these steps, you should be able to effectively narrow down your investment choices to eliminate most of your risk while enabling yourself to choose companies that match your investing knowledge and experience.

If you need more detailed help with choosing a stock, then this video should help to guide you.

I hope this info answered your question.
-Grant