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So we�re on our own when it comes to stock analysis then? That's no problem for online traders they can improve on analysts reports anyway. The trick is to be your own analyst and it's now a lot easier than it was, making analysts not just unreliable but increasingly outmoded. Foremost, an analyst report can't tell you if a particular stock fits well within your existing portfolio. The author doesn't know your financial goals, risk appetite or other portfolio holdings. We could hardly do worse than bank analysts. Recent research found that after transaction costs there was no point buying the strongest recommended stocks relative to the least favorably recommended ones.
Being your own analyst is straight forward. Most investors fail however, because they don't first ask what type of investments they are searching for. Do you want undervalued stocks, or growth companies, or speculative recovery stories? Knowing the type of company you are looking for, you can begin mimicking the analysts but without the downside of any conflict of interest. The key is to be efficient. After all, with a portfolio of stocks, and rejecting as many companies as you accept after your research, you could easily expend 30 hours in research. Undertake the research task only four times a year and a $20,000 portfolio achieving a 15% return only carries a $25 per hour salary.
Efficiency means starting with research tasks which take the least time per company so you can rapidly narrow down the number of possible interesting companies and spend increasing research time as you zone in on the best candidates for inclusion in your portfolio.
Being your own analyst efficiently requires mimicking their research routine:
1. Produce a list of stocks for further research using an online stock screen or independent stock research sites. A value investor will for instance narrow their search according to valuation measures such as price/earnings ratios.
2. An analyst's database of corporate history can be substituted by using the search facility on news and commentary sites to discover any problems about the company and whether it warrants exclusion from your list.
3. Fundamental data on a company for more detailed research to ensure the stocks meet your criteria are not the exclusive remit of the analyst but available freely.
4. Find out what the company you are researching is saying about itself. You don�t need an analyst's report to access the company's annual report. Neither are analysts reports needed any longer to provide access to company conference calls or webcasts. If small companies are your main interest, big bank analysts reports are of little use anyway because they rarely cover such companies. Small company research sites provide an alternative.
5. Having bought the stock, monitor your holding using real-time quotes and online portfolio managers something
Category: InvestingBe Your Own Analyst was written by:Author:Anthony GreenAdded: Mon, 04 Feb 2008 07:21:29 -0500 This Article Has Been Read 208 times View all Anthony Green's articlesAbout the Author: Collect your free stuff like stock recommendation and investment strategy articles onstock market on http://www.5minutetrader.com/benefits.php. |
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