"I'm constantly amazed at popular explanations of why stocks behave the way they do, which are volunteered by amateurs and professionals alike."
          -- Peter Lynch

Analyzing Stocks

There are ten basic ingredients to look at when evaluating stocks:

1. Industry Ranking -- This can be looked up on line or in Value Line
   
2. Timeliness -- relative price performance for the next twelve months
   
3. Safety -- all stocks carry risk, but it is possible to calculate their relative risk; the narrower the band of fluctuation, the lower the rating, and the safer the stock
   
4. Debt -- the higher the debt the company is in, the higher the risk
   
5. Beta -- compares the volatility of a stock's price relative to that of the total market; the lower the beta, the less volatile
   
6. Sales and Earnings -- high levels of sales and earnings insinuates a higher growth rate
   
7. Stock Price -- low stock prices allow you to buy more shares and makes it easier to buy shares in an even lot to reduce transaction costs
   
8. Price-Earnings Ratio -- price of a security divided by earnings per share
   
9. Upside-Down Ratio -- helps identify stocks whose prices are more likely to rise than fall by calculating this; evaluates the relative odds of potential gain versus the risk of loss for a given price per shares
   
10. Management -- want companies run by managers with solid track records that can bring the company to the next level of growth