Evaluating stocks for your personal investments

Personal investing can make a person become a millionaire in a matter of months if you select the right stocks. When you are looking to expand your investment portfolio to grow your wealth, you need to take a look at the value of the stock you are considering. Good investors don't need to hire brokers to make all their investments happen, they are able to take initiative and do them on their own. Here are a couple things you need when you are evaluating stocks for personal investments:
|
|
- Annual reports
- Executive report
- Balance sheet
- Income statement
- Management information
Annual reports
Marketers are in charge of making the annual report look attractive so it will help to attract new investors. The annual report is one of the best tools you have at your disposal when you are evaluating stocks. The annual report will talk about the goals of the company and if they were able to achieve their goals from last year or if they exceeded them. Most annual reports will be full of fluff and it can become mind-numbing if you are browsing every page just to find the information you need.
Executive Report
Within the annual report, there will be a section for the executive report. The executive report will talk about the company and why their sales are continuing to increase. The executive report will be short and explain to their investors how the company plans to improve to exceed their expectations for next year. To figure out how much truth is in the executive report, you should find a report from last year to see if they have consistent growth and the changes they have tried.
Balance Sheet
Towards the back of the annual report, look for a consolidated balance sheet. The consolidated balance sheet will provide you with information about the financial position of the company. This report also provides information about the company assets and liabilities. This is a good way to judge a company's performance to see if they are able to pay all their debts or if they are starting to fall behind. Try to avoid investing in a company that is in the red or is on the verge of going into the red.
Income Statement
Next to the balance sheet, you can also view the income statement and the cash flow statement. You need to use this information to make ratio analysis. Use the companies current assets number and divide it by its current liabilities, this will leave you with the current ratio. The current ratio is the number you need to judge the performance of the company and if their stock is worth investing into. Check for the industry ratios to see where this company is at. If they are in the middle, they are pretty solid. You want to avoid a company that is far above their competitors because this normally means this is the peak for this company and you have missed your window of opportunity to make money.
Management Information
The last thing you need to obtain from a company is information about their management. Several companies have some great products, but the people never hear about them because of the poor management of the company. It is not uncommon for people to get greedy and start taking money from the company to fill-up their own wallets. Watch out for strange numbers with a company and red flags with their management. Some of the best companies have declared bankruptcy because their poor management drove them into the ground. Look for a company that has solid managers running it, this is the best way to know your money is safe.
