Basic Principles To Beat Stock Market (Part 1)

Author: Newton Oderhohwo

Source: ezinearticles.com



The Stock market always responds to the grip of either the Bull or the Bear, but the bottom line remains positioning for profit in the nearest possible time. There are some basic principles to adopt in order to make profit in the stock market



BUYSTOCKS OF FUNDAMENTALLY SOUND COMPANY
In a continuous bearish situation of the market, investors should build their tent on good companies, weather they are growth, value or dividend, Stock Market Exchange, paying companies. This is because they are the best stocks to hold in one's portfolio. Stock of such companies could be affected as a result of the down market and panic selling by irrational investors. Such companies may have posted impressive earnings but the market is responding to it due to bearish tend in the market. However the financial strength of the companies remains stable. Most of them would even continue to grow and develop. As time passes and the bearish period ends, the stock price would quickly catch the intrinsic value of the company and the price would go up and that is one way to make money in shares.



BUY UNDERVALUED STOCKS
During a bearish market, equities reflect their real value when compared with their price earnings. This suggests that the market, Stock Market Exchange, creates opportunities for investors to buy stock at the cheapest price and make money.



There are stocks which are traded at discount to their fair value even before the bearish market. It is possible that some of these stocks will still lose additional value; chances, Stock Market Exchange, are that many of them would yield a positive return even in unstable market.



For instance, many stocks sell at relatively low price when compared with the last public offering price and what they sold when the market was bullish. At a time like this,, Stock Market Exchange, investors should take position as equity prices becomes cheaper, though more risky.



Most of such, Stock Market Exchange, stocks that sell below 50% are with lower multiple, such as price to earning ratio (P/E) or price to book ratio (P/B). They sometimes tend to be cheaper. However, low multiple is not enough; you must compare the current multiple of the company with the historical value of same multiple in the past. Great companies having lower multiple compared with historical value and to the industry, Stock Market Exchange, average, have better prospect, Stock Market Exchange, of becoming successful investments even during a bear market.

Newton Oderhohwo is the CEO and senior investment and stock analyst of Stock Exchange Profits inc., member of investors intelligence group int'l, and runs a periodic commentary on stock investments and making money in shares.