Easy Method to Buy Good Stocks

Stocks can be underpriced and they can be overpriced. The purchase price of a stock makes a big difference to how much you make on a stock, even when buying for the long term. So it is important you pay a reasonable price for a stock

What I am going to talk about is a good method for deciding on when to buy a stock. You will use a list of good stocks and then check each stock against what stock analysts say about it before buying any stock. This is not, however, foolproof system.

What you want to do is go to the Mergent's Dividend Achiever’s list of the best Canadian dividend paying companies. Their list is at
http://www.dividendachievers.com/Site/others/constituents.php?id=733&preview. To determine what stock analysts feel about each stock, check the stocks at the Globe & Mail Investor’s site at http://www.globeinvestor.com/. Enter each stock code in the “search” box, indicating it is a stock. Follow each code with a T. For Example, for AGF Management Ltd, use “AGF.B-T”. Another place to find out what stock analyst think, is to go to Daily Buy and Sell Adviser’s list at http://www.dailybuyselladviser.com/special_reports/index.html and click to download the “Morning Call” report.

You will notice that the stock analysts will vary on their recommendations. Some will say Buy, and others Hold or Sell. They all have a 5 point system, and they will make a call based on what the majority of the stock analysts think.

The Globe & Mail rates stocks as Strong Buy (1), Buy (2), Hold (3), Underperform (4) and Sell (5). Morning Call rates stocks as Buy (1), Buy/Hold (2), Hold (3), Hold/Sell (4) and Sell (5). Other sites talk about Buy (1), Overweight (2), Hold (3), Underweight (4) and Sell (5).

For example, if according to Morning Call a stock has 9 analysts with 5 saying the stock is a buy, 3 saying it is a buy/hold and 1 saying it is hold. To get a collective rating, you would give the buys 1 point for each analyst (or 5 points) and buy/hold 2 points for each analyst (or 6 points) and the hold 3 points for each analyst (or 3 points) for a total of 19 points. Divide by 9 to get 1.5, which is a buy. You should consider this a buy. (Any rating over 2.5 is a buy.)

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website at www.spbrunner.com/stocks.html for a list of the stocks for which I have put up spreadsheets on web site.