Use A Fundamental Screener

You should start with a large number of potential investment firms. Narrow them down to a small number that has exceptional quality for your long or short trade with a screener. You can use a screen on many websites on the internet.

Exceptional quality is based on their risk versus their possible return and their fundamental financial metrics. The financial metrics you are looking for a buy are high revenue growth, high-profit margins, low operational costs, low long-term debt, increasing cash flow from operations, and high retained earnings. They measure separate good companies from bad companies and indicate a firm that grows investment value through capital gains or dividend returns. They result from business methods that are garnering customers, using earned profits wisely, policing costs, and most importantly, pre-emptively route competitors through strategy. For long term holding, the firm’s strategy is one of the most important things to analyze. The best firms need to a plan which creates and reserves room for them to grow.

The industry is not more important than strategy. A firm’s tactics can allow it to continue making money if the industry turns hostile and becomes infiltrated with competitive firms. An industry with high margins and high reinvested profits attracts competition. Capital seeks areas that can provide high returns. This competition can easily chip away at another firm over the long haul. Over time, a firm’s profits will return to an average across the industry. Firms require a solid long-term strategy to prevent this from happening. A successful strategy will allow a firm to continue to grow in the face of new or heavy existing industry competition. You are seeking growth, so the firms should be established without having extinguished their potential. They often can be in industries that are starting to pick up in sales or marketable size for a readily identifiable reason, but only if the reason is a long-term technical reason.