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Growth investing
Looking for companies that are sales and earning machines, growing at least 20% a year & pushing new highs in stock price
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What are the growth investing key company measurements?
- 1) Earnings increasing
- 2) Recent stock price strength
- 3) Low dividends bc reinvesting
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Where are most growth stocks traded?
NASDAQ
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Value investing
Looking for companies that are cheap
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What are the value investing key company measurements?
- 1) Low P/E ratios
- 2) Low Price-to-book ratios
- 3) Dividend payment
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Two types of Analysis
- 1) Fundamental Analysis
- 2) Technical Analysis
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Fundamental analysis
Examines the information about the company's health & potential to succeed.
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Technical analysis
Examines the past behavior of the sotck price in different market conditions & attempts to prdict the stock's future price based on current & projected market conditions & trading volume
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Intrinsic value
the price a stock should sell at under normal market conditions
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Instrinsic value measurements
- 1) Earnings
- 2) Assets, looking at debt
- 3) Management history
- 4) Price
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Cash Flow per Share
The stream of cash through a business
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Current ratio
Current assets over current liabilities, gauging a company's ability to pay its short-term bills.
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Dividend yield
Annual cash dividend over current price, identifying bargain large company stocks
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Earnings per share (EPS)
Subject to manipulation and market pressure
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Earnings momentum
- Earnings acceleration or the big mo
- A company's earnings per share isncreases quarter after at a fast rate
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Earnings surprises
a company showing either higher or lower earnings per share than expected
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net profit margin
- Money left over after paying all its expenses over the amount of money it had before paying expenses
- A high margin indicates that the company has a great managers because they are controlling costs
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Price/book ratio
- Indicates how much the stock would be worth if the company were liquidated
- Less than 1 means that the price of the stock is less than the liquidation value, a good thing
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Price/earnings ratio
A high P/E indicates risk because its more difficult to meet the high earnings expectations
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Price/sales ratio
A good indicator because it can not be manipulated by accounting rules
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Quick ratio
- Indicates the ability to deal with short-term needs
- Cash and equivalents over its current liabilities, bigger is better
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Return on equity (ROE)
- Net income over total shareholder's equity
- A good return is anything above 20%
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Relative price strength
Shows how well a stock price performed compared to the prices of all other stocks
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Volume
Indicates how much interest people have in the stock, allowing to catch trends for low volume stocks
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3 stock classifications
- 1) Company Size
- 2) Industry Classification
- 3) Growth or Value
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