Do you suffer from analysis paralysis? Do you have a stock you are interested in buying but you don't have the foggiest idea of where to even start a proper analysis? Investing today is much different than it was 50, or even 20 years, ago. Back then, you could only get a limited amount of stock data in the daily newspaper, you have access to a seemingly unlimited amount of data on every publicly traded stock.
This is both a blessing and a curse. With access to so much information, many investors get lost in the details, but if you know where to look, you can make more informed investing decisions. You can actually conduct a thorough analysis of any stock in 12 easy steps: As we get started, it is important to remember that the Nasdaq Dozen is neither a crystal ball nor a guarantee of success. Rather, it is a rational, repeatable process for analyzing the most important fundamental and technical aspects of any stock.
You also need to remember that no stock is perfect. If you look hard enough, you can always find something wrong with a stock. On the other hand, if you look hard enough, you can always find something good about a stock. The trick is to invest in stocks that have more good qualities than bad. Here's where the Nasdaq Dozen comes in. By looking at 12 key aspects of any stock you are interested in, you can quickly determine if the stock is one worth pursuing or one better left alone.
To score the 12 factors of the Nasdaq Dozen, you need to assign each factor either a passing or a failing grade. After you have scored all 12 factors, add up the passing grades and compare them to the failing grades. If you have a high ratio of passing grades compared to failing grades, you can be more confident in the stock.
Conversely, if you have a low ratio of passing grades compared to failing grades, you would be less confident in the stock. For instance, you would feel more comfortable investing in a stock that had 10 passing grades and only two failing grades-a ratio of When you go to the Nasdaq. Please be aware that this guide was written in and the data cited in the charts over the next few pages reflect this. The data itself may be a little out of date, but the advice remains as relevant as ever.
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Earnings per Share EPS 3. Return on Equity ROE 4. Days to Cover Analyze a Stock in 12 Easy Steps Do you suffer from analysis paralysis? Let's get started and learn how to score each of the 12 factors in the Nasdaq Dozen. All content in this article is supplied by Wade Hansen of Learning Markets. To learn more about their investor education offerings, please visit learningmarkets.
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