This is how Professional Do Valuation in Stock Selection.
CANSLIM
C – Current Earning
A – Annual Earning
N- The New Factor
S – Supply and Demand
L – Leader Vs Laggard
I – Institutional Sponsorship
M- Market Direction
C: Current Earning
Look For stocks with earnings growth of at least 25% in their latest reported Quarter. Bigger growth is even better you should/would like to see acceleration over the last three Quarter for example, One Quarter earnings maybe upto 25% The next Quarter upto 50% and the most recent upto 90%
N.B Current Quarterly earning must be +25% or more in recent Quarter
A: Annual Earning
You should want to see annual earnings growth of atleast 25% of each of the three years. We have also found that greatest stocks of all time had the best margin in their industry group and return on equity of atleast 17%
N.B Annual Earnings must be upto 25% in each of the last three years.
N: The New Factor.
The biggest CANSLIM winners had something new. New products, new services, new leadership, new price high or new condition in the industry. Another important factor is to look for newer companies. Our studies of the greatest stock market winners showed that 75% of them went public within the last 8years.
N.B New product, services, management and more is very vital in picking a stock.
S: Supply and Demand
One of the most basic economic Principles is the law of supply and demand which is most sharply demonstrate in the stock market. Strong demand for a limited supply of available share will push a stock price on the flip side. An oversupply of share and weak demand will cause the price to sag.
N.B Supply and Demand atleast go for a stock which is atleast $20 a share. Cheap one is not so much in demand.
L: Leader Vs Laggard
True leaders are these companies showing the best earning growth, strongest sales, Superior price high performance and are in leading industry groups. Consider buying high and selling high. The results from our study of the greatest market winners revealed something quite interesting in effect, The stronger stocks get stronger. The task of astute investors is to locate the strong leading companies and avoid the weak one with laggard performance.
I: Institutional Sponsorship
Mutual Funds, Pension Funds and Banks are the big players that drive the market. They account as much as 80% of all trading activity. For a stock to be a top performer it must have institutional support to fuel its price moves. We suggest that you only buy stocks that have atleast 10 Mutuals Fund that own it and ideally have 2-3 Quarters of increasing Institutional sponsorships.
M: Market Direction
Our study show 3 out of 4 stocks follow the market trend so you always want to trade in sync with the market . You should only be buying stock in a confirmed uptrend and protect your capital in a correction.
Those are most important things to put into consideration while buying a stock.
And the website which is great resourceful is Investors Business Daily (IBD) they have weekly Newspapers I don’t Know whether is available in all Countries but here is their website. https://www.investors.com/ After opening the website go to Research, Stock List, Market Trend, News but to access it you pay $20 for two months subscription.
You have to know also Stock Market Seasonal Tendency. Period in the Year which stock tend to be high and Low. Here is
LET ME PICK ONE MAJOR STOCK WHICH IS STOCK INDICATOR DOW JONES
January Is Bearish Means Price Going down Sell
February is Bullish Means Price going high BUY
March is Consolidation Means the price is not trendy just rangy mostly not good month to invest in Stock Market.
April Bullish means price is going High is month to BUY stocks
May Bearish means price going down Is period to SELL stocks
June Consolidation Ending Bearish (Sell of May) the market become rangy Avoid investing in that period.
July is Bullish BUY period into Mid-Year High trend.
August is consolidation month is rangy avoid buying Stock in this month.
September 1st half Bullish 2nd Half Bearish…means first 15days is for BUY then in the last 15 days is for SELL
October is a very Strong Period for Buying stock
November Strong period price also go high BUY
December Is Bullish Price goes High
You can Check the seasonal Charts here : https://www.seasonalcharts.com/classics_dj_ia.html
In General, February To May and October to January are Ideal to Buy Stocks. And Stocks with Bullish (BUY) signal will be having obvious buying Structure because Stock Market is not over manipulated like other Assets in Financial Market.
Mont of 2nd Half of January, May-June are ideal month to sell Stock.
