My question to you is; can you provide a brief a synopsis on your methodology for researching and choosing your stocks?
I know this is a loaded question. There can be so much to consider. My question is two-fold. By what resource do you perform your investigation and what aspects of the "fundementals" do you deem most important?
Any resources that you may point me to to help answer my two questions would be greatly appreciated as well.
I use Yahoo Finance to make my initial research. There is a lot of information gathered on a couple of pages in an easy to digest format.
First thing I check is the Summary page. I look at market cap and what stock exchange it is selling on. If it's not on the NYSE or NASDAQ I typically stop my search. I don't want to deal with delayed trade executions on smaller exchanges, low volume stocks, and/or penny stocks (Though I have dabbled...)
Still on Summary page I look at the graphs of Earnings and Financials. Yahoo has easy to read charts showing quarterly earnings and if they beat expectations and also bar chart showing revenues and earnings side-by-side (click on quarterly results)
Next up is the Statistics page. Here you will find various valuation metrics, summaries of the financial ratios, profit margins, quarterly growth rate, stock price and number of share information. I look for strong balance sheets combined with earnings growth and momentum. Of primary importance to me is quarterly growth rate and year over year growth rate. Profit margin is very important as well.
From here I go to the financial information--balance sheet, income statement, and cash flow. Quarterly results are more informative than annual results.
Of particular concern to me on balance sheet is current ratio, needs to be at least 1.5:1 for me. Long term debt is another metric I check but what defines a good number really depends on the industry. For example, financial stocks or home builder stocks will have a lot of debt. I also check to see how often a company issues shares. Maybe they have lots of cash because they sell more shares every year. I stay away.
These simple tests fufills about 90% of my stock screening. If they can't get past these tests I usually stop looking. If they pass, I get into the nitty-gritty of checking SEC filings, reading quarterly reports, insider trading records, majority stockholder info, etc. You can learn A LOT by reading the 10-Q reports. They list a lot of wheeling and dealing that you don't read about elsewhere.
Finally, I visit the company website, investor section and maybe read the press releases.