What stock to buy questionnaire

While I was writing one of my articles, I wandered to myself: “Maybe, these weekly articles are too much complicated, even if I try to write them in a simple way. There is the need of something simpler to start from. What are the most common questions I could give an answer to?”. In this way, I could help many people to solve some doubts. So, I decided to find out these questions in internet. I have found them inside Yahoo Answers. I have copied the most common ones (10 questions as they are) and I have given to each of them a deep answer. In this way I have made a list of all them and my answers, in one single page: I think that this contribution can be helpful. They deal with different aspects about stocks both for beginners and experienced traders. So, let’s start.

 

1. What stock to buy if recession?

During a recession, net revenues of companies decrease, generally. So the value of their stocks decreases as well. I think that there are two kind of recession: a recession with inflation and a recession without inflation (its name is depression). In the first case, I think that the stocks which belong to companies that deal with precious metals are the favorite ones: with inflation the value of commodities grows. In particular, the value of the rarest metals (gold and silver) may grow very much. So, net revenues of these companies may grow as well. In the second case, during a depression with no inflation, it is very difficult to find out stocks of good companies worth buying. Their net revenues decline and the value of their stocks decline too. There may be exceptions to this conclusion but they are very few. In this case, I think that the investment in bonds is more preferable. In fact, as interest rates tend to decrease, their market value can grow considerably.

 

2. How do I determine what stocks to buy for a short term period?

In this case the problem is to define what short term period you refer to. However, it is very preferable to trade the most volatile stocks. I suggest this simple method to find them. Let’s suppose that I am interested in the 30 day cycle (but my reasoning works with shorter term cycle too). This cycle is represented by a simple moving average of 15 days. If I consider an annual cycle (250 EOD data) I can calculate the absolute value of the difference between the closing price of each day and its 15 day moving average. Then, I make the sum of all the values and I divide it by 250. What have I found out? I have found out the medium movement for each day of my considered stock, respect its 30 day cycle. If I compare this value, calculated on different stocks, I can understand what is the stock that moves the most on average, in an annual cycle respect its 30 day cycles. In this way I have established a method to find out the most volatile stocks. So, I can go long and short on these stocks.

 

3. What are the best stocks to buy and invest in?

I think that the best stocks to buy are those ones that have great medium term volatility: they can grow a lot in value and they can decrease a lot as well. The greater this oscillation, the longer the trend which joins a minimum to a maximum. For a trend following trader like me, these are the preferred stocks because their trends can be the greatest ones.

Instead, the best stocks to invest in, belong to those companies that have a stable or increasing long term business. They don’t oscillate very much, but their net revenues increase on average every year in the long term (for example Coca Cola, Mac Donald, Goldman Sachs, etc.). Warren Buffet docet…

 

4. How to know what stocks to buy?

This is the aim of my website: to understand what stock to buy in each intermediate cycle. I have already explained elsewhere this argument deeply, but I want to recap what are the stocks I am interested in: a) those stocks that have increasing net revenues; b) those stocks that have been punished too much by the market as they are at a very low level of price. There are many mathematical tricks to find out them with. The solution is to build a stock picking system that helps you to find them with simple parameters. You need to use it regularly.

 

5. What would be a great stock to buy for a 21st b-day?

This question has made me laugh, as I have found it funny.

To buy some stocks for a friend or for a son may be a good and an original gift… if their value increases over time. Otherwise, it has not been a wise idea. I think that the stocks worth buying are those I would invest for the long term. I have explained this concept in my answer given to the question n. 3. I don’t think that a 21 old boy knows how to manage or to trade high volatility stocks. He is likely to learn it along the years, but I think that for such an occasion, investment stocks are much better.

 

6. What is the best book to purchase for a beginner to learn how to purchase stocks?

I think that the best book is “Trend following: learn to Make Millions in Up or Down Markets” by Michael Cowel. It explains two simple things: there are always trends you can follow and what is the correct mindset to face this challenge. The limit of this book is that it doesn’t explain really why trends exist and how they usually evolve. But the explanation of the correct mindset of a trend following trader is very good. It does not explain what stock to buy, for instance, but it explains how you can trade stocks. I think it is a very good book which you can start from. The second good book you can read is “You Can Still Make It In The Market” by Nicolas Darvas.

It offers some basic concepts about stock picking that can be used today. It helps to understand what are some simple but fundamental aspects that a stock should have before buying it.

I have inserted an image of both of these two books in my website.

 

7. What should I know before investing in stock? How do I know what stock to buy?

You should know how the stock market behaves. I mean that the stock market passes continuously from an undervalue level to a overvalue level. Both levels are linked one another by a trend. You should buy stocks that behave like the index of the market they belong to or that are stronger than it. You should understand what a stable business is and why stocks of such a company are interesting to invest in. You should understand how to calculate the fair value of a company, discovering it by the use of balance data or the graphic of its stocks. Then you should create your method of investment or trading. You should improve it regularly. These are only a part of the concepts you should know before approaching the stock market with real money. It is a difficult job but it is an interesting one. Keep on studying and improving.

 

8. What are good stocks to buy that will be worth a lot 5-8 years from now?

You should buy those stocks that belong to companies that have increasing net revenues over time. In this way their fair value will increase and the value of their stocks will increase too. Take one look to my answer at the question number 4.

 

9. What is the best way to get started buying/selling stocks?

I think that the best way can be explained as follows: 1) you have to decide what is the time frame you like to trade in (short, medium, long term); 2) accordingly to your choice, you have to decide if you want to be a fundamental trader or a technical trader; 3) then you have to find out your method of trading that represents you, your character, your expectations etc. Do a great amount of research on the past data and verify your method; 4) if your method seems to work, then make some paper trading for some months; 5) if your method still works, open an online account with 2000 $ and test it with real money. Remember to improve your method constantly and believe in it. In fact, financial markets are continuously manipulated by big investors and they have become a mathematical war, where the best trading systems win. In my experience the best trading systems are usually the simplest ones: they have to be simple but not stupid. So, believe in your trading system and follow it. It is up to you to find it. So, work hard and results will come.

 

10. What are sites that tell you specifically which stocks to invest in?

It is difficult to give one simple answer to this question. It depends on the time frame you want to refer to. If you want to buy a stock you need to know how much time you want to keep it. Solved this problem, I think it will be easier to find out a good website that you like. In my website, for instance, I keep under control only the NASDAQ stock market and the stocks I want to trade in the intermediate or in the 6 month cycle. I try to find out the over performing stocks that can have great up trends. As a general rule, I can say that you are better not to rely on other opinion blindly. If you want to know what stock to invest in, you need to do your research, your calculi and to verify other people’s advice. Use a simple method that works.

 

In this questionnaire I have given one answer to the most common questions about stocks. I have expressed my simple point of view about them. It has been something interesting for me because in this way I have understood the most common questions, doubts, and misconceptions, that I have find out in internet, expressed by the general public. This work has been helpful also for me and I hope it is has been helpful for you, specially.

I remember that there are two particular gifts for those persons who will subscribe to my weekly newsletter. The first one is a report called “The truth about stocks: how to manage risk without fear ”. This is an enhanced version of questions and answers about stocks, similar to those contained in the previous questionnaire. It is an enhanced version because it deals with many important aspects of the stock market, I have not discussed in this questionnaire. I hope you will like it.

The second gift consists in a video that explain why trends exist and how we can use them to trade stocks.

Kind regards,

Fredrick

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  • Fredrick

    Fredrick

    This is MY OBJECTIVE point of view about US STOCK MARKET. I look for the BEST STOCKS TO BUY in this market. Follow me...

  • TRADE IN A SIMPLE WAY.

    5 KEY POINTS OF MY TACTICS:

    1. SIMPLICITY
    2. PRACTICE
    3. CONCISENESS
    4. FAIRNESS
    5. ONLY THE BEST STOCKS WITH LOW RISK

    THIS MEANS IN PRACTICE:

    1. FUNDS PUT THEIR MONEY IN A STOCK;

    2. THAT STOCK IS EITHER UNDERVALUED OR A GROWTH STOCK (GREAT BARGAIN);

    3. I SUGGEST THAT STOCK TO MY CUSTOMERS.
  • STRONG AMERICAN STOCKS – FREE FINANCIAL ADVICE 2016 (FEW DAYS DELAYED)

    Ticker % Gain/loss Current price Buy price Buy date Sell price Sell date
    EXR -10 89.32 90.3 1 FEB 16 81 8 FEB 16
    QTS -1 54.25 48.6 6 APR 16 47.99 22 APR 16
    GWB 2 32.79 32.4 19 MAY 16 33.1 13 JUNE 16

  • STRONG AMERICAN STOCKS – PAID FINANCIAL ADVICE 2016 (1 MONTH DELAYED HERE)

    Ticker% Gain/lossCurrent priceBuy priceBuy dateSell priceSell date
    EDE1333.929.301 FEB 163310 FEB 16
    RLI468.8762.517 FEB 1664.908 APR 16
    ITC1646.840.418 FEB 16
    QQQ4107.49102.523 FEB 16106.429 APR 16
    CWT4352730 MAR 162820 MAY 16
    DFT-147.5640.530 MAR 164022 APR 16
    NJR-538.6536.730 MAR 163522 APR 16
    MIK028.3928.407 APR 1628.322 APR 16
    AOSL513.9112.111 APR 1612.720 MAY 16
    REXR1521.218.518 APR 16
    DCT1448.1842.29 MAY 16
    JBT-561.2261.2325 MAY 1658.328 JUNE 16
  • MOST UNDERVALUED AMERICAN STOCKS

    Ticker % Gain/loss Current price Buy price Buy date Sell price Sell date
    CBOE -7 60.98 66.3 1 FEB 16 61.4 5 FEB 16

  • Undervalued stocks are used to appear two times a year. It is great to buy them!

    Undervalued stocks are used to appear two times a year. It is great to buy them!
  • Buy the strogest stocks that go up faster!

    Buy the strogest stocks that go up faster!
  • If you need a personalized course or personalized lessons, I am ready to teach you. Choose the argument!

    If you need a personalized course or personalized lessons, I am ready to teach you. Choose the argument!
  • This is a complete customizable trading system. It is simple and it works.

    This is a complete customizable trading system. It is simple and it works.
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  • Federico, l have to say that it's very unusual to come across someone that is as open and honest as you are.
    You openly show all your calls including the loses. Such honesty should be rewarded.
    I will continue to follow you and thank you so much for your time and efforts.

    Angela P. (UK)

    /////////////////////////////////////////////////

    Dear Fredrick you are a very serious and reliable person.
    You have always given to me pieces of advice and information that have revealed very valid.
    What distinguishes you is the seriousness and the love that you use in doing all this.
    Thank you.

    Azzurra Z. (IT)

    /////////////////////////////////////////////////

    I just happened upon your site in the last few days and am satisfied with your attempt to communicate. I will continue to follow until I see a noticeable lack of "something" like sound advice, logical remarks and well put sentences. Should I notice what I feel are these and other short comings, I will attempt to email you at this address and share my concerns. I know you want to be a success at this and I support your endeavors. Be patient. Asking us for input today, that's a good idea.

    Ben W.

    /////////////////////////////////////////////////

    Hello Fredrick,
    I happened to bump into your blog and i must tell you that i'm glad i have. I'm an aspiring trader whom wants to develop a trading method like you have since i dont have the time to daytrade....
    I would appreaciated it if you can give me further explanation and i was also wondering if your willing to take me as your apprentice to teach a good strategy like the one you've acquired. I have experience position trading but i need a good foundation like you have. ...
    Thanks in advanced,

    Harley D.

    /////////////////////////////////////////////////

    Hi Fredrick
    First of all I wanted to thank you for your analysis on the Italian market and the Nasdaq.
    I found your suggestions very helpful and I followed all the signals of the newsletter with great results.
    ...
    Best regards

    Domenico S. (IT)

    /////////////////////////////////////////////////

    Hello Fredrick, some time has passed and I wanted to write to you to thank you warmly for your weekly counseling about markets.
    I want also to congratulate with you for your forecasts that are always accurate and detailed. My regret is that I have not always followed you.
    While I am saying bye to you, I want to espress my best wishes to you for the great work you are used to do in your website.

    Bye and thanks again.

    Andrea Z.

    /////////////////////////////////////////////////

  • Important: 10 questions and 10 answers about stocks

    Read the linked article by clicking on the yellow question mark

    Read the linked article by clicking on the yellow question mark

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