Author Topic: Want to try stock picking, looking for info and tools to select good stocks  (Read 676 times)

Padonak

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Can someone recommend good web sites I can use to find stocks which may be currently undervalued, e.g. the lowest Price to Book ratio, the lowest PE and PE10, the highest dividend yield. Or maybe you can recommend specific stocks?

I don't usually do stock picking or market timing, just buy and hold index funds long term. However, I think this may be a good time to try stock picking and invest maybe up to 5-10% or the portfolio in undervalued individual stocks.

dougules

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Why are you asking about stock picking on the MMM forum?  I would strongly recommend against it.  There is a lot of uncertainty right now, so the stakes are pretty high if you guess wrong.  Also, keep in mind that expectations for how a company will weather this crisis are already priced in. 

If you just want to stock pick for fun, don't use any money you wouldn't take to Vegas.   

Wolfpack Mustachian

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Can someone recommend good web sites I can use to find stocks which may be currently undervalued, e.g. the lowest Price to Book ratio, the lowest PE and PE10, the highest dividend yield. Or maybe you can recommend specific stocks?

I don't usually do stock picking or market timing, just buy and hold index funds long term. However, I think this may be a good time to try stock picking and invest maybe up to 5-10% or the portfolio in undervalued individual stocks.

No offense, but from the way you're asking, you really, really don't need to be picking stocks. Even stock pickers on here generally admit that they spend a lot of time and have a lot of background knowledge looking into it. Statistically, you won't beat the index funds. If you want to "diversify" get a plan together and do it, but diversify in the form of bond indexes, international indexes, us indexes, and the like. Please don't pick single stocks. You might win once in awhile (I did when I was young and dumb :-) ), but in the end, you will be much better off just going indexes.

Stimpy

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morningstar.com is a good place to start BUT.....

As has been already said, it doesn't sound like you really know what your getting into.  Understanding valuation etc takes time to learn and understand.  It's not something you want to willy nilly go into.  Especially if you don't have or make a plan.  Your probably better off just indexing.

However IF you do want to learn, seeking alpha is a great place to learn, and I would recommend reading a bit on there before trying your hand.   Sure you may miss the bottom,. or you may not, but if you picks all go broke you might as well as not played at all.

Also, 5% is a lot, start at 1% if you can.  That way whatever the lesson, it's a fairly cheap one.

J Boogie

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Can someone recommend good web sites I can use to find stocks which may be currently undervalued, e.g. the lowest Price to Book ratio, the lowest PE and PE10, the highest dividend yield. Or maybe you can recommend specific stocks?

I don't usually do stock picking or market timing, just buy and hold index funds long term. However, I think this may be a good time to try stock picking and invest maybe up to 5-10% or the portfolio in undervalued individual stocks.

Our economy is far too dynamic to rely on ratios as an indicator that a company will be successful.

Those who buy distressed companies often do so as activist investors, meaning they want to influence the company to change course in some way. And they often lose their shirt anyways. Who has gotten rich by investing in failing companies? Far more people have gotten rich investing in growth companies. Retail investors would do well to focus any stock picking style investing on companies who they know create value. For example what other tabs do you have open right now? I've got FB & IG, Gmail, outlook, AMZN, Google news. So it's no surprise I invest in FB, MSFT, and GOOGL. That combo has handily beaten the market for some time and unless I'm missing something, will continue to beat the market for some time. They have moats and sticky ecosystems, and their valuations are not unreasonable. It is fairly clear to see these companies will continue to be major players. I assumed they traded at unfairly high multiples when I started stock picking, and have come to realize that might be true if Joe Schmo stock pickers like me moved the markets. But we don't. Institutional investors assess all companies, and the highly visible/attractive ones don't seem to come with too much of a premium. If they did, fancy pants Target would trade at a higher multiple than Walmart. But WMT trades at 23 while TGT trades at 15 times earnings.

Meanwhile, if a mid 20's PE ratio strikes you as too high, you just might go digging in the bargain bin and find a company with much more debt, much less cash, much less growth projected, much less intelligent employees & management, much worse margins and much stiffer competition.

Your plan could well end up with you losing a good chunk as you catch falling knives.

On the other hand, if you are willing to do a fair amount of research, find one or two companies that have fallen out of favor and you just can't understand why. Play devil's advocate and try to make the best case you can as to why they're doomed. If you ultimately find you just can't accept the negative thesis, and you see them sending the next 3-5 earnings calls out of the park, go for it. But don't be too surprised if you're wrong and learn to read between the lines when the CEO makes their statements and delivers guidance.

My Dad was a financial advisor who picked stocks for all his clients. I mostly got into it because I like woodworking and couldn't convince my Dad to get into woodworking. So now we talk stocks all the time.


Wintergreen78

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If you want to get into picking stocks, hereís a book that gets recommended a lot as a starting point.
https://www.amazon.com/gp/product/B000FC12C8/ref=dbs_a_def_rwt_hsch_vapi_tkin_p1_i0

Edit: whoops, I posted the wrong link at first
« Last Edit: April 02, 2020, 01:53:19 PM by Wintergreen78 »

MaaS

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Looking for the "cheapest" stocks based on P/E or P/B ratios is the absolute worst way to pick individual stocks.

As others stated, if you have to ask, you should be buying the index.

If you insist, go with quality. Google, Berkshire, etc. A lot of these "cheap" companies may not exist on the other side of this.

hodedofome

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You could do a lot worse than using the magic formula from Joel greenblatt if you just want to lick cheap stocks. https://www.magicformulainvesting.com/

Read the book and follow the plan. He screens for both cheap AND good stocks, and the performance of the strategy is listed in the book.

I have followed the strategy in real time for about 7 years now and while itís had a hard time lately, the strategy is sound.

MustacheAndaHalf

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After decades of ~100% index fund investing, I pushed 25% into individual stock picks about 1.5 weeks ago.  I'm keeping most details to myself, but I did update my experiment ("An experiment" thread) and revealed 3 stock picks.  Right now, that experiment is down -30% to the stock market's -4%.  How would you feel losing -30% in 10 days?

President Trump (R) and Nancy Pelosi (D-CA) agree on the need for a 4th relief bill.  But I'm concerned that Mitch McConnell (R-KY) currently disagrees.  I'm counting on his self-interest in an election year to save small companies and workers from economic hardship.  I'm optimistic that conditions won't come to that, but I expect some bankruptcies, which is a -100% loss for those stocks.

If you look at index funds, they have companies from 11 different sectors of the economy.  I think that's an important idea, even in picking stocks.  More sectors means more diversification, and more stocks means less single company risk.  You can't avoid the overall bankruptcy risk for a chunk of the U.S. economy, but you can try to mitigate other risks.

Back to index funds, Larry Swedroe recommends a value tilt in his books, based on historical data.  Value stocks are those with the lowest P/B and P/E values, so it's not inherently wrong to use those - any more than a value tilt is inherently wrong (maybe we disagree on both, which is fine).

I like Morningstar for statistics, and Yahoo Finance for historical prices and company-related news.

GreenEggs

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I know there are dozens of stock screeners available, but this is a free one that seems pretty good. 


https://www.finscreener.com/screener/stock-screener