When deciding whether to initiate a position in a stock, 70% of the decision comes from fundamental analysis, while the remaining 30% relies on technical analysis. In last week’s webinar, “What to Buy? Don’t Overlook the Fundamental Story,” our coaches reviewed how fundamental analysis based on the characteristics of model stocks that made historic gains can be a useful guide.   Here’s a recap of the highlights:

Strong earnings growth is usually the main catalyst for a stock’s price advance:

“The stocks you select should show a major percentage increase in current quarterly earnings per share.”

—William O’Neil, How To Make Money In Stocks

When flipping through weekly charts and analyzing the fundamental block, look for companies that are showing quarterly and annual earnings increases of over 25%.

Increased  sales are also as important, as accelerated sales show a demand for the product.

Return on equity is also key, as it gives you insight into how the company handles its finances. Winning growth stocks usually have a ROE of more than 17% before making their price advance.

Finally, take the time to understand management’s outlook for the company and the company’s story—that is, how the company’s product or service fits into a broader, accelerating trend.

If you have any questions, you can reach us at 800-424-9033 or at reachus@marketsmith.com.

Best Returns,

George Orlando, MarketSmith Team