Automatic Income Method

This is committed to people who wish to spend money on individual stocks. I has shared with you the methods Personally i have tried over time to pick stocks that I have found being consistently profitable in actual trading. I want to make use of a blend of fundamental and technical analysis for selecting stocks. My experience has demonstrated that successful stock selection involves two steps:


1. Select a stock using the fundamental analysis presented then
2. Confirm the stock is surely an uptrend as indicated by the 50-Day Exponential Moving Average Line (EMA) being over the 100-Day EMA

This two-step process raises the odds the stock you select will probably be profitable. It now offers a signal to trade ETFs which has not performed as expected if it’s 50-Day EMA drops below its 100-Day EMA. It is a useful means for selecting stocks for covered call writing, quantity strategy.

Fundamental Analysis

Fundamental analysis may be the study of financial data such as earnings, dividends and money flow, which influence the pricing of securities. I use fundamental analysis to help you select securities for future price appreciation. Over time Personally i have tried many methods for measuring a company’s growth rate to try to predict its stock’s future price performance. I used methods such as earnings growth and return on equity. I have found the methods usually are not always reliable or predictive.

Earning Growth
As an example, corporate net profits are be subject to vague bookkeeping practices such as depreciation, cash flow, inventory adjustment and reserves. These are common be subject to interpretation by accountants. Today more than ever, corporations they are under increasing pressure to beat analyst’s earnings estimates which leads to more aggressive accounting interpretations. Some corporations take special “one time” write-offs on their balance sheet for specific things like failed mergers or acquisitions, restructuring, unprofitable divisions, failed product, etc. Many times these write-offs usually are not reflected as a continue earnings growth but alternatively show up as a footnote with a financial report. These “one time” write-offs occur with more frequency than you may expect. Many businesses that constitute the Dow Jones Industrial Average have such write-offs.

Return on Equity
One other popular indicator, which I have found is just not necessarily predictive of stock price appreciation, is return on equity (ROE). Conventional wisdom correlates a higher return on equity with successful corporate management which is maximizing shareholder value (the larger the ROE the better).

Which company is a lot more successful?
Coca-Cola (KO) using a Return on Equity of 46% or
Merrill Lynch (MER) using a Return on Equity of 18%

The solution is Merrill Lynch by any measure. But Coca-Cola features a greater ROE. How is that this possible?

Return on equity is calculated by dividing a company’s net income by stockholder’s equity. Coca-Cola is indeed over valued the reason is stockholder’s equity is only corresponding to about 5% with the total market value with the company. The stockholder equity is indeed small that almost anywhere of net income will make a favorable ROE.

Merrill Lynch however, has stockholder’s equity corresponding to 42% with the market value with the company as well as a much higher net income figure to produce a comparable ROE. My point is ROE does not compare apples to apples so therefore is not an good relative indicator in comparing company performance.
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