When we approach to the Markets, a good question would be: what
stock should I buy or trade?
Before any trade, whether short term or investing operation, the right thing to do would be to have a List of Stocks (WatchList) that comply with our Fundamentals requirements.
This List should be made by a set of stocks that meet some minimum Fundamentals requirements, based on
Fundamental Analysis. Moreover, if we are going to trade with
options, more requirements will be needed, for example that the stocks should be optionable.
The longer the time frame is our trading, the more importance will have to trade over stocks with good Fundamentals.
If our trading is at the short term (days or weeks), the Fundamentals of our stocks will have little importance. In this case, Technical and Sentymental analysis will have more specific weigth. Of course we could also trade the
bearish side looking for stocks with bad business figures, o even ETF’s.
ETF’s has the advantage that they do not have Earning reports, so we have not
risk of unexpected
volatility increase or sharp price movements.
However, if our trading is focused in a more longer term (months), as Investment strategies, we should trade on stocks with growth capacity, it means, good fundamentals.
Some key aspects to be considered when making our Watchlist should be:
– Volume of trading: we are interested in highly liquid shares, especially for operation with Options.
– Debt: we are interested in low-debt companies. The less the better.
– Growth trends: we look for companies that in recent years have had growth and has expectancy to continue generating profits, and also doing better than competency.
– Management team: we want the company’s management team is efficient and able to use the company resources the best as possible, much better than the competency.
– Intrinsic Value: we must look for stocks undervalued.
We must remember that stocks represent companies with a business, figures and results, and depending on how the bussiness is going on, the stock will do the same. Therefore, our Watchlist must be kept updated, depending on how the bussiness are developing, improving or not.
SharkOpciones.