Step # 2 Making a Stock Buy List
To make a stock buy list, narrow down your stock picks to not more than 10.
Each of your stocks should be from different industries so you will have a diversified
portfolio. Here is the screening process:
- Identify the stock symbols for your publicly traded companies by using the web
site called Public Company
Search Engine at
Simply type in the company's name such as Coca-Cola to get the symbol, KO.
- Use the Internet at the Wall Street
Journal Briefing Book web site, which contains summary information of company
backgrounds, financial overviews, stock performances, company news, and press releases of
over 7,000 companies to check the following criteria:
- The stock price is above its 200-day moving average
- The company's earnings and sales has been growing more than 15% annually in the
past few years; thus, the earnings per share will double in about five years.
- The P/E ratio is not higher than the growth rate
- Return on equity is higher than 15%
The address of the WSJ Briefing
Book is http://interactive.wsj.com/edition/resources/documents/bbsearch.htm
If you are new to the WSJBB, click here to learn more.
The WSJ site is best viewed with Microsoft Internet
The Wall Street Journal Briefing Book, company web sites,
and the like are essential tools for screening stocks according to the above financial
criteria. You cannot rely solely on recommendations or on favorites or firsthand
experiences in picking stocks. For example, you might have originally picked the stock of
Apple Computer because you saw many people using Apples in school. However, when you check
the financial performance of Apple in the Briefing Book, you will discover that it does
not meet the selection criteria.
- Visit the company web sites to make your final stock buy list. Recommended sites
for finding company web pages are
Bill Gates said, "Perhaps the most efficient way to
find information about a company is by studying the company's site on the Internet's World
Wide Web. Not every company has one but more and more do each day. In fact you can often
learn more about a company on the Web than you would actually spending a day at the
Company web sites provide more information about companies than does the Wall Street
Journal Briefing Book. They provide the "story" of a company with its
successes and setbacks, not just financial data.
Visit Investing For Kids for more background on Stock Analysis.