Pick a Stock :: Step 2 – Company Statistics : Many investors choose companies of particular size they are comfortable with. Number of shares outstanding multiplied by the current stock price is a common measure of the company’s size. Generally firms are categorized as large, mid, small and micro-capitalization, depending on the outstanding value of the company stock. Lot of investors are familiar with mid and large-cap companies. Companies like Pfizer, Proctor and Gamble, General Electric (NYSE:PFE, NYSE:PG, NYSE:GE respectively) are examples of such familiar stocks.
Investors need to review the companies characteristics very carefully, the industry the company is into and its growth potential. If the industry is in the early stages, you may expect very high growth in sales and earnings. At the same time you need to calculate the risk involved. Mature companies are expected to display steadily rising rate, but at slower rate.
Pick a Stock :: Step 3 – Constructing the Screen : There are some good professional software packages available in the market for screening. Some public websites and brokerage firms also offer this information. You need to determine your investment goals, tax implications, risk tolerance and time horizon. Once these goals are determined properly, you can select the criteria parameters to be used in the screen.
Pick a Stock :: Step 4 – Narrow the Output : Even after following the above 3 steps, you need narrow the list again. It gives further scrutiny about the companies such as social and personal concerns, comfort level with the industry etc. A deep analysis of the company has to be performed with the publicly available information, from the companies and the investors websites.