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Introduction to Fire Your Stock Analyst!: Analyzing Stocks On Your Own, 2nd Edition

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Want to be your own stock analyst? This chapter will show you how to identify potential candidates, weed out the obvious misfits, research and analyze the survivors, pick the best prospects, and, equally important, apply a clear-cut set of selling rules.
This chapter is from the book

Experts tell us that investment success requires a disciplined approach to finding, researching, and analyzing potential investments. This chapter describes one such approach, and the ensuing chapters fill in the details. It's based on sound principles that are practiced by market-beating money managers. It's certainly not the only way, and it may not be the best way. But it's a place to start, and following it will make you a better investor. After you've mastered these strategies, you can modify them to suit your needs.

The process involves identifying potential candidates, weeding out the obvious misfits, researching and analyzing the survivors, picking the best prospects, and, equally important, applying a clear-cut set of selling rules.

Identifying Potential Candidates

Finding stocks to analyze can be as easy as visiting the gym, talking to your neighbors, picking up a magazine, surfing the Internet, or turning on the TV. You'll find no shortage of tips. You'll welcome all such advice once you've gained confidence in your analysis skills, because you'll be able to weed out bad ideas quickly.

As your experience grows, you'll get a feel for how to identify strong candidates. You'll find yourself increasingly taking advantage of screening to uncover investment ideas. Screening is a technique for scanning the entire market for stocks meeting your requirements. It's a powerful tool, but to use it effectively, first you have to understand how to identify the best candidates. That will come with time. In the meantime, I've provided a few sample screens in Chapter 3 to get you started.

Treat all names you get, whether from your own screens, friends, TV gurus, or even Warren Buffett, as tips to analyze using the techniques you are about to learn.

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