The Fundamentals of a Company
As you look around in life, at the kitchen table, driving to work, or even outside enjoying your favorite pastime, you may hit upon a company that you think is a good stock candidate.
You need to find the basic financial health of the company. Thats looking at their "public" reports of their finances. They have to report to the SEC (Securities Exchange Commision) quarterly, and if there is any surprise changes that may change their financial direction, they will have to file another form to the SEC. An amendment if you will. Now, this can be good or bad. All you will see is the report was filed, and good luck trying to make sense of it.
Take for example, a company that sells a widget. Then you see a notification that they have amended their forecast. Your first instinct is oh this isn't good, sales are falling for the widget; however, what really happened is that the company put a sale on the widget and the volume of sales increased so much, that their quarterly report to the SEC and shareholders now looks false.
So the first place that one should look for guidance, is at the financial health of the company.
Next, you need to compare that company to its competitors. They may look great, but another company may have better management. It could be that they make a little less in profits, but provide a good employee environment to work in due to pay, benefits, etc. You discover this company has a 15 year pattern of increasing dividends, and employee retention is at an average of 25 years! How do you compare the two? The company you like is brand new, and making a ton of money due to its new widget. Now you have to ask yourself some important questions. Can company B, make a similar widget? Patent rights? How many more companies in the future will copy this idea, or modify it?
Know the company you want and it's competitors.
The fundamentals are key! Ask yourself the tough questions, and find the answers. The company's web site, on-line sources abound with information for public traded companies. Then you have the opinions out there on web forums, from analysts, other stock traders and buyers.
Make sure you do the research on the fundamentals, then look at charts for clues. This is a good starting point.