Hey everyone! I just read a fascinating blog post titled “How to Identify the Growth Potential of an Investment”, and it got me thinking. The article dives into different methods to assess an investment’s potential, from fundamental and technical analysis to qualitative factors and macroeconomic conditions.
Fundamental Analysis: Do you guys usually dig into the financial statements of a company, like income statements and balance sheets, when deciding to invest? How important do you think the company’s market share and product life cycle are in predicting its growth?
Quantitative Analysis:How do you approach the evaluation of key financial ratios like ROE, ROA, and EPS? Do you find the Discounted Cash Flow (DCF) method reliable for assessing whether a stock is undervalued or overvalued?
Qualitative Analysis: When considering an investment, how much weight do you give to the experience and track record of the management team? Do you think a strong brand and customer loyalty are as crucial as the blog suggests?
Macroeconomic and Environmental Factors: How much do you take into account the broader economic conditions, like inflation or regulatory changes, when assessing an investment’s growth potential? Have technological advancements in a sector ever swayed your investment decisions?
Technical Analysis: For those of you who rely on charts and indicators, what are your go-to tools? Do you find patterns like head and shoulders or indicators like RSI and MACD to be effective in predicting price movements?
Would love to hear your thoughts and experiences with evaluating investment potential. What factors do you prioritize, and how do you balance them in your decision-making process?
Hi @intra2435, first at all … welcome to Babypips.
Your questions are related to stock market, so I will answer base on stock market point of view. It doesn’t applicable to other instruments.
About stock market, you have to be specific with the market itself. If you are trading stock in certain market, you must be careful, market maker will manipulate the market in certain way. But if you are trading US stock market, it will be different.
Before you touch stock market, you need to define yourself as trader or investor. Trader will use momentum, they consider less on fundamental, more on psychology of technical analysis. For example most trader use golden / death cross as one of the signal to enter the market. Psychology of news are also important but not to detail.
When you are an investor, you need to go through all fundamentals (ROI, Market Cap., ROE, ROA, DER, PER, etc). You need to know how the companies are doing and their plain and condition to make them grow. When all fundamentals are good, not being manipulated by market maker, then technical will be use to find the best possible entry price.
I have invested in and traded many UK stock market companies. I have never read a word of any financial report from any of them.
My guidelines are to buy only when the US and UK stock market indices are all rising.
Then look for an industry sector in which multiple company share prices are rising.
For timing the purchase look for the market reaction to the latest results. It’s bullish if price closes higher that day than the day before, and the price usually continues rising.
Look for an experienced and successful CEO joining the company.
That can sometimes be quite a big deal, I think? But it always feels to me something like “trading the news”, too: I worry that big investors know about it before I do, and by the time I find out (from conventional news sources) either the value’s gone or a correction is on the way(?) …