How to Research Individual Stocks

In our opinion, the two most basic, cost-effective, and objective research tools are the Value Line Investment Survey and Standard & Poor's Stock Guides. Both may be available at your local library.

The Invaluable Value Line

The basic Value Line service covers approximately 1,700 stocks. For each stock, Value Line provides two rankings: timeliness and safety. Of the two, pay particular attention to safety. Stocks are ranked on a 1-5 basis, with 1 being the safest. Don't consider any stock with less than a 2 rating.

Value Line also provides scores for four other key indicators:

· Financial strength
· Stock price stability
· Stock price growth persistence
· Earnings predictability

In addition to the rankings and key indicators cited here, Value Line includes a great deal of relevant statistical and narrative information. Value Line reports are updated regularly. The individual company write-ups will take some getting used to, but after a while, you will find that you can easily determine a company's earnings growth rate and the consistency of that growth rate.

Use Value Line to help you select at least 25 stocks that:

· Are safe or very safe (that means a ranking of 1 or 2)
· Are growing at an above-average rate
· Are growing consistently and steadily

What does "above average" mean? We suggest you look for a minimum of 8 percent and, ideally, 10 percent growth. And keep an eye on consistency. For a 10 percent grower, 10 percent a year is perfect but rarely achieved. A range of 8-12 percent is consistent. From 6-14 percent is acceptable. But if the company's earnings swing between 0 percent and 30 percent, for example, it's too volatile to be in your portfolio unless you know exactly what you're doing.

S&P Stock Guides

Standard & Poor's Stock Guides (Bond Guides are also available) are an excellent research tool. The guides come out monthly and cover over 6,000 stocks, 700 mutual funds, 600 closed-end funds, and 800 preferred stock issues.

Newspapers

Finally, two newspapers, Investors Business Daily and The Wall Street Journal, do an excellent job of tracking the stock market and individual stocks. Either may be available at your local library.

If you simply must follow the market during the day, both CNBC and Bloomberg Information TV do a good job of keeping you current. For a nightly wrap-up, check out PBS's Nightly Business Report.

How I Made $6 Million in the Stock Market
amazing report from a trader who made $6 Million trading stocks