What To Look For When Buying Shares In US Stock Exchange

What To Look For When Buying Shares In US Stock Exchange - Learn the Most Profitable Long-Term Investment Strategies Buying & Selling Stock In America

Are you a beginner in the stock market? Find tips on what to look for when buying shares in US stock exchange with practical examples of how to compare performance.

We all love stocks that make money, post positive return and beat analyst forecast without going ahead of what fundamental says and risking a downside potential. But what if you knew they are not easy to spot? that means you need to understand some basic fundamental factors successful stock traders are employing to win consistently.

In this guide, I will be sharing tips to investing profitably in the stock and what to look for when buying shares in US stock exchange market.

While our local stock exchange lost 3.56% of its value in 2016, a trend that was not unconnected to massive sell, low FDIs, and economic instability, the US stock market recorded solid gain in the same period, driven by post-election rally with Dow Jones posting 20.4 percent gain, its biggest yearly gain since 2013. The top performing sub-sectors in the US are Energy (+23.7),  Financial ( +20.1), Telecom (+17.8),  Industrials  (+16.1), Materials  (+14.1), Utilities (+12.2), Technology (+12.0). Consumer (+4.3)
The top performing sub-sectors in US stock market in 2016 are Energy (+23.7),  Financial ( +20.1), Telecom (+17.8),  Industrials  (+16.1), Materials  (+14.1), Utilities (+12.2), Technology (+12.0). Consumer (+4.3). You can refer to this article on how to spot a stock that will rise again for profitable tips on how sector performance can help you pick good stocks to buy now and sell later.

While the investing strategies mentioned in the article is suitable for short-term traders, I can not guarantee its effectiveness for long-term trading because most of that factors driving stocks are not 100% fundamental but sectorial news and events which are only trade-worthy for just days.
What To Look For When Buying Shares In US Stock Exchange

What to look for when buying shares in US stock exchange market for long-term profit.

These are my four core metrics to spot great stocks that will not only reward you as price appreciates but also have the capacity to pay a high dividend ratio to patient and long-term investors in US stock market:
  • Growth: Check whether profit and free cash flow are increasing
  • Valuation: Is the company share price growing in line with earnings per share?
  • Opportunities: Is the return on shareholder equity increasing while long-term debt to equity declines?
  • Dividend: Is the company paying dividend consistently, (for more than 5 years)?
Here are a table showing the performance of Female Health, one of the female products company listed in US stock market:

For Growth, & Valuation Metrics:

Passing Criteria3-Year* ChangeGrade
Revenue growth >30%63.8%Pass
Improving profit margin178%Pass
Free cash flow growth >Net income growth404.5% vs. 355.3%Pass
Improving EPS362.8%Pass
Stock growth (+ 15%) <EPS growth94.4% vs. 362.8%Pass

For Opportunities & Dividend:

Passing Criteria3-Year* ChangeGrade
Improving return on equity122.1%Pass
Declining debt to equityNo debtPass
Dividend growth >25%40%Pass
Free cash flow payout ratio <50%52.8%Fail

While these tips on what to look for when buying shares in US stock exchange will help find a great company to invest in, you can also share additional ideas on how you have been able to find good stocks to buy.