The first step in choosing good stocks is to pay attention to market capitalization. For information, market capitalization is the share price multiplied by the total number of shares issued by the issuer and listed on the Stock Exchange. On the other hand, before we continue, you may check out the Mago do mercado if you wish to learn more about stock investments.
Market capitalization is important to look at because:
Can provide information related to how high the stock price volatility.
Knowing how much public ownership in the issuer.
Seeing the company’s potential going forward.
In addition, it is also necessary to find out the nature of the shares themselves. Is it fairly liquid, sufficiently liquid, or less liquid? A good stock is a stock that is liquid. Why? It’s because these shares are traded at a higher frequency or above the minimum frequency limit that has been determined.
It’s useless the value of capital is large but less liquid. So, look for stocks with large capitalization and fairly liquid nature.
Observe the income, profit, and margin
What about the company’s financial statements contained in the capital market dashboard? To choose quality stocks, it is necessary to observe the income, profit, and margin. How:
Check income and net income for the past two years.
Check the comparison of earnings in the quarterly report (quarter I with quarter II) and annual report (last three years).
Pay attention to the price to sales (P / S) ratio and the price to earnings (P / E) ratio.
Watch for the latest trends whether growth is volatile or consistent. Or if there is a big change (more than 50% in a year) towards the top or bottom.
Also check the company margins whether the trends are generally up, down, or remain the same.
Future Competition and Industry Prospects
Rapid technological developments often “kill” companies that are not ready. Don’t get caught up in buying company stock that isn’t sensitive to change.
You can compare one company with its competitors to measure how big the overall market share for the products the company produces. Don’t forget to do the future projections of the industry. Can it still survive or tends to decrease?