What's the Best Stock to Spend In?

If you're like most stock market investors you have struggled with finding the most effective stocks to invest in.

There are numerous approaches to find the best stocks to invest in. But first you will need to choose what method is most effective for you.

Basically you will find two main kinds of stock market investing

1. Purchasing growth stocks

2. Purchasing value stocks

Growth stocks are companies which can be growing fast in earnings. There are a large amount of hi-tech and medical growth stocks.

Value stocks are stocks which can be undervalued simply because they trade at a lower price compared to the company's fundamentals (i.e. earnings, dividends, sales etc...)

Growth stocks generally will fatten your bank account faster but there's more risk whereas value stocks will generally grow at a slower more sustainable pace but probably won't offer you ulcers.

Here's what some investors try to find in a growth stock (based on my knowledge of the National Association of Investors Corporation (NAIC) criteria):

1. Strong Earnings Growth - either quarter to quarter or year over year

2. Strong Forward Earnings Growth - analysts estimate what earnings will soon be for the following quarter or year go now, when they estimate growth that's a plus.

3. Profit margins - you'd prefer the company to be making a considerable amount of profit to sustain further growth

4. Return On Equity (ROE) - try to find growth in ROE or a stable ROE

5. Doubling in 5 years or less - you'd prefer the stock to double in 5 years - look at what the analysts estimate for price potential.

Also here's what some value investors try to find:

1. Shares price below intrinsic value

2. Low Price to Earnings (P/E) ratios

3. Price to Earnings Growth (PEG) ratio below 1 is good

4. Stock price is less than tangible book value

5. A debt to equity ratio below 1

6. The company's assets should be more compared to company's liabilities by at least a factor of 2

7. Dividend Yield within 1/3 of the quantity of the AAA bond yield

8. Earnings growth of at least 7% a year for days gone by 10 years

You can find all sorts of alternative methods to find the best stock to buy but this will provide you with a starting point.