Free Stock Screener

Getting involved in the stock market means you've got to start somewhere. This course will give you the tools to find stock picking ideas and kickstart your investing career.

Generating Ideas

Generating ideas

There are two types of shoppers out there: impulsive and diligent.

Imagine a person buying a car.

An impulsive shopper will walk into a showroom and buy the first car that catches his or her eye. A diligent shopper will do his homework, shop around for deals and find reviews and comparisons before taking out his checkbook.

Which shopper do you think will end up with the better deal?

The Stock Market

The stock market isn’t any different. The most consistent investors will devote weeks or months shopping around and researching different companies before finally investing.

Easier said than done, right?

The most common problem facing new investors is, “how do I know which stocks to buy?”. We know we don’t want to be the impulsive shopper and buy the first stock that comes to mind. But still, where should we get started?

The truth is that stock ideas are all around us. You see, stocks are tangible: they represent real companies that we encounter everyday.

This course will show you how to spot those buying opportunities.

Interest-Based Investing

They say you should write about what you know. So, we’ll take that advice and share some back: invest in what you know. Part of successful stock-picking is understanding exactly what you’re investing in. If you know the industry, you’ll have the upper hand when deciding when to fold’em and when to hold’em.

In fact, the world’s most famous investor, Warren Buffet, calls this the “Circle of Confidence”. Buffet famously avoided the tech boom and burst in the 2000′s, claiming he just didn’t fully understand technology companies. But in some cases an “old dog can learn new tricks”. In 2011, Buffett invested $11 billion in tech giant IBM.

In practice

One way to do this is to consider what you’re passionate about. Have a background in human resources? You might be well poised to buy stock in software firms, corporate services, and companies that support HR. Are you a foodie? Why not consider investing in companies in the restaurant industry?

Point is, you can draw on your business know-how, your hobbies, your passions, and your background to inform the choices that you make. Practice buying a stock in a business that you're interested in.

Stock Screeners

Now that you’ve got a list of some of the kinds of stocks you may be interested in, it’s time to bring in some technology and further your reach. The Web has provided us with some stellar tools for learning about and searching for different stocks. One of these tools is the online stock screener.

Think of these as search engines made specifically for the investment market.

Using the ideas you generated in the previous step, you can now browse by factors such as industry (or sector), price, and even analysts’ estimates of a stock’s growth over time. Don’t be daunted by the number of options. You can work with just the variables that seem manageable at first, then make your search more complex as you get used to using the screeners.

Assignment time!

  • Step 1: Head over to the stock screener at DailyFinance.com
  • Step 2: Select the Sector of your choice. For example: Technology
  • Step 3: Scroll down and select “Dividends Per Share” located on the side bar
  • Step 4: Change low-end of Dividend Per Share from 0.00 to 1.00

The result should look something like this:

  • Step 5: Hit the “View Results” button. This will show all technology stocks with a dividend greater than 1.
  • Step 6: Hit the button below, and buy one of those stocks. Easy as that!

Piggyback Strategies

Still feeling awash in options? One way to beat early investment paralysis is to pick stocks based on what the big guns do.

The Cramer Bounce

Tune in to Jim Cramer on CNBC’s Mad Money. It’s not uncommon for a stock to shoot up in value overnight, just because he name-checked it the previous night. (That’s called a Cramer Bounce.) But be weary of the Cramer Crash, too…

The Buffett Imitation

Warren Buffett Imitation

There’s also a phenomenon coined the Buffett Imitation: a study by some academics suggests that investors could dramatically increase their returns by simply following what Warren Buffett buys.

Always consider, however, that investors’ picks are often pictures of the past. They may have turned around and liquidated what they had bought already. Make sure you look at their actions over time and be sure you’re not making your own moves before you see the whole picture.

Using Social Media

There’s never been a time like the present, when an unlimited amount of information and ideas are right at your fingertips. With the help of online platforms such as forumsmessage boardsTwitterFacebook, and the blogosphere, you’re set to scour the Internet for trending companies and sectors on the uptick.

The end result is that when a product, service, or company is enjoying strong reception — or broadcasting positive news — you want to know about it. In the realm of Facebook “Likes” and Twitter “retweets” you are able to take note of what is being talked about in real-time, and whether or not that talk is positive or negative.

One great social media destination for stock ideas is Stocktwits. It's like the Twitter for stocks, and you can find tons of trending investing ideas and company news.

Case Study

SEC Logo

So now you're getting a good idea of all the information that's out there for you to use. But before you get too excited and start reading up on all the trending ideas out there, here's a cautionary tale:

Jonathan Lebed and the Pump and Dump

One of the most infamous “Pump and Dump” scammers in history was a teenager from New Jersey. In 1999 and 2000, 14 year old Jonathan Lebed made a small fortune trading penny stocks from his basement.

The Scam

During the peak of the Internet boom, with technology stock prices soaring, Jonathan Lebed took advantage of a new medium to scam his way to hundred's of thousands of dollars.

On 11 occasions, Jonathan would purchase large quantities of extremely cheap penny stocks. Then he would hit the message boards, forums and send out “spam” emails explaining why the stock was going to rise. Jonathan created a number of aliases, claiming inside knowledge about the stocks in question.

Jonathan would watch as the stock immediately rose after his onslaught of spam, and then sell his shares immediately. Jonathan's average profit per trade was estimated around $50,000.

The Penalty

In 2000, the SEC got word of his scam, and prosecuted him on security fraud. Jonathan and the SEC settled to the tune of over $280,000.

The lesson: Don't believe everything you read. Sure, you should use all the tools at your disposal to learn as much as you can about prospective investments. But take what you read with a grain of salt. In today's technological world, everyone has a voice. So filtering out the good information from the bad is key.

Using the News

For as long as there has been a market, there has been the news that surrounds it. From the Financial Times to the Wall Street Journal, from Forbes and Businessweek to your regional daily, when journalists report news, the markets take notice.

Very similar to the way you might use social media to identify news cycles, journalism can also supply useful intelligence about companies and their financial information. By staying up-to-date on financial news reports, you can better understand stock price trends.

Technical Analysis

Investors tend to implement analytical systems when it comes to choosing stocks. One system is called technical analysis. The technical analyst looks at historical price data in search of indicators that a stock is going to continue or reverse its current trend. He or she often tries to picture what will happen next by making a chart.

We won’t get into too much detail here, but what you should understand about technical analysis is that investors look at past data and identify trends that predict future outcomes.

Have a look at this price chart from Apple:

As we can see, the “trend” appears to be trending upwards and to the right. That means the stock price is likely to continue to increase.

  • The blue line is called “resistance”. While Apple is increasing, it's unlikely to increase at a rate that will put it above that line.
  • The red line is called “support”. If there are dips in the stock price, it is unlikely to drop below that line.

Once you understand where those levels of resistance and support are pegged, you can start to make predictions about where the price is likely to go next.

Find Stocks From The Best

You did it! Let's do a quick overview of what we covered here.

Takeaways

  • Investing in a business that you're interested in or passionate about will increase your chances of success
  • Use a stock screener to learn more about stocks you're interested in
  • You can also piggyback big-time investors and mirror their stock picks
  • Use social media platforms to find trending company news and investing ideas
  • Take what you read with a grain of salt and filter out the good quality info from the bad
  • Technical Analysis is used by many investors to predict the likelihood of where a stock's price is going

Piggybacking Buffett

Warren Buffett

“I always knew I was going to be rich. I don't think I ever doubted it for a minute.”

— Warren Buffett

Talk about confidence! Warren Buffett has made billions through his investing, and he wants you to be able to invest just like him. Through the years, Buffett has offered up investing tips to shareholders of Berkshire Hathaway. Now you can tap into the best of Warren Buffett's wisdom in a new special report from our friends at The Motley Fool. Click here now for a free copy of this report.

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