There are a lot of investors out there that go it alone. They do their own research and make their trades through a low-cost broker. These investors are to be congratulated for their entrepreneurial spirit, but the problem is that sometimes these brave folks don't know where to begin or, more specifically, how to screen for stocks. In order to select an individual stock as an investment, investors first need a good source of prospective investments. This is where up-to-date stock screeners and market data can prove quite useful to the individual investor. In this article, we'll show you how they can be used. To find out more about screening stocks, see Getting To Know Stock Screeners. Don't Underestimate the Value of Timely Market Data Investors need as much information as possible about what's going on in the market. This means tapping into a variety of sources for economic, industry and company-specific information. To be clear, investors don't need to delve into statistics and the intricacies of every industry the same way Wall Street economists do, but they do need to have a good grasp of what is driving the market. To read more on this subject, see Choosing An Advisor: Main Street and Mad Money Therefore, listening to business reports on television, surfing financial websites and reading the latest trade journals and daily newspapers is highly recommended. Again, savvy investors should be on the lookout for data and events that will drive the economy going forward. Obtaining information from a wide cross-section of sources will ensure that an investor isn't receiving a biased or incomplete news flow. In terms of news, here are some examples of the types of information investors should tap into on a regular basis:. Information on interest rate trends, or the likelihood of a future rate hike or cut is extremely valuable. Remember, if an investor can properly stock or predict the likelihood of future rate cuts and increase his or options exposure to domestic equitiesthat investor stands to make a lot of money. Again, this is why timely, thoughtful analysis of economic news is important. Incidentally, CNBC usually does a fairly good job at not only reporting interest rate news, but also helping the public gauge the potential for a change in future Fed policy. To read more about interest rates, see How Interest Rates Affect The Stock Market and Trying To Predict Interest Rates. Information on Screening oil production and domestic inventory stockpiles is equally important. The simplest answer is because our economy and future GNP depends on the ability to source oil at a reasonable price. Again, CNBC, The Wall Street Journal and Investors Business Daily do a great job at not just reporting this news, but also helping investors forecast possible changes in supply. Find out more about OPEC and the GNP, in Getting A Grip On The Cost Of GasEconomic Indicators to Know and Macroeconomic Analysis. When Screening, Prune the Dead Wood First The trick to proper stock selection is being able to winnow down a number of potential investments to a few viable candidates. This can best be accomplished by knowing which types of companies to avoid. Examples of such businesses would be makers of children's stuffed animals non-electronic toys are a well-known commodity and electronics distributors that simply ship goods to retailers. These businesses could easily see their profits shrink if they options even one sizable retail account, or if the manufacturer finds a different distributor to ship the goods for less. In fact, even the slightest downtick in business could send profits plunging. Typically, commodity-type businesses and distributors carry low margins. Again, all of these companies are inherently "more risky. Companies that Are Not Considered "Best in Class" Like screening parent always said, "you get what you pay for. How can an investor tell whether a company is "best in class"? Odds are it will have the largest market capitalization in the business, the largest presence in terms of geographic footprint and will tend to be a "trend setter" in the industry in terms of price, store format and product offerings in which it operates; Wal-Mart, Microsoft and Exxon Mobil are terrific examples of such companies. To learn more about market caps, see Market Capitalization Defined and Determining What Market Cap Suits Your Style. Identifying the Diamond in the Rough There are a number of characteristics that successful companies tend to have:. And while this may sound like common sense, many investors tend to ignore this timeless advice. To find out how Lynch chooses his investments, see Pick Stocks Like Peter Lynch. Investors with intimate knowledge of the products and the companies screening buy can better understand their growth potential. The Financials — What's Attractive Investors should always review the major financial statements income statementcash flow statement and balance sheet of the companies they invest in. To learn how to read financials, see What You Need To Know About Financial Statements. Winning Half the Battle Knowing how to screen for stocks and specifically what to look for is a major battle for most investors that go it alone. The above commentary should serve screening a starting point stock entrepreneurial investors. If you take the initiative, you will gain insight and sharpen your skills as you go along. Dictionary Term Of The Day. A period of time in which all factors of production and costs are variable. Latest Videos PeerStreet Offers New Way to Bet on Housing New to Buying Screening This Mistake Could Cost You Guides Stock Basics Economics Basics Options Basics Exam Prep Series 7 Exam CFA Level 1 Series 65 Exam. Sophisticated content for financial advisors around investment strategies, industry trends, and advisor education. How Investors Can Screen For Stock Ideas By Glenn Curtis Share. Top Stock-Picking Strategies In order to select an individual stock as an investment, investors first need a good source of prospective options. In terms of news, here are some examples of the types of information investors should tap into on a regular basis: Next, consider consumer sentiment numbers, housing starts and employment figures. These data sets, while primarily lagging indicators of the economy, give investors the sense of what the broader public is thinking and how they are spending their money. This is important data to have because it allows the savvy investor to see a trend and gauge the consumer's willingness to spend money on certain items in the near future. As an example of using this data, if consumer sentiment is high, housing starts are steadily increasing and unemployment is down, one might properly assume that higher-end retailers will fare better. Conversely, when all of those indicators are flipped, a proper assumption would be that lower-end retailers would fare better. Keep reading on this subject, in Surveying The Employment ReportRecession: What Does It Mean To Investors? Except in the most special circumstances, investors should generally steer clear of: Distributors or Commodity-type Businesses Because these companies aren't manufacturers, they are merely middlemen that rarely have any unique qualities that would draw large numbers of investors. Plus, in general, there is often less of a barrier to competition when it stock to becoming a distributor. To read more about commodities, see Commodities: The Portfolio HedgeWater: The Ultimate Commodity and Commodity Prices And Currency Movements. Companies that Are Thinly Traded Thinly traded means that these companies trade fewer thanshares per day. The market or "spread" for these types of stocks is often extremely volatile. In fact, investors have enough to deal with when it options to analyzing the fundamentals. Sharp swings in supply and demand and the potential impact on the share price is just too hard to gauge, even for a seasoned investor. Companies that Have Just Announced a Significant Acquisition Companies that take on big acquisitions often end up reporting large, unforeseen expenses that can put a big options on near-term earnings. Again, while such a deal could present an enormous opportunity, the downside potential is far too often overlooked. Manhattan Bagels is a terrific example of this. In the late '90s the nationally known bagel chain bought one of its biggest rivals on the West Coast. But it turns out there were accounting problems and the stores that the company bought didn't turn out to be nearly as profitable as it or investors had initially hoped. Because the acquisition was so huge, Manhattan Bagels couldn't weather the problems, and was eventually forced to file for bankruptcy protection. Identifying the Diamond in the Rough There are a number of characteristics that successful companies tend to have: It's because this is the benchmark that many institutions look for prior to getting into a stock. Of course, keep in mind that companies that grow at a faster pace often have trouble maintaining their growth after a few years, and are more likely to disappoint investors. To find out more about this subject, see Great Expectations: Forecasting Sales Growth and Find Investment Quality In The Income Statement. Insider Buying Insider buying is a great indicator that a company may be undervalued. Because while some senior executives may buy shares simply to demonstrate their faith in the company, the lion's share buy company stock for just one reason: Look specifically for companies where several insiders are buying at or near the current market price. A terrific source for insider data is the SEC. However, other non-governmental sources also offer good data on this subject, including Thomson Financial. For more insight, read Can Insiders Help You Make Better Trades? Companies Sporting a Solid Chart While technical analysis shouldn't be a major factor in the stock selection process, it does have its role. Ideally, investors should be on the lookout for a company that is steadily advancing in price on higher volume. Because stocks that advance on increasing volume are under accumulation. In other words, there is a broad-based momentum in the stock that is likely to continue to bring it to new levels. Picture the trajectory of an airplane taking off - that's what you are looking for! Look for stocks that are making new highs. Often companies that are breaking through, or have broken stock, technical resistance have recently experienced some positive fundamental improvement that is drawing attention to the stock. What's the advantage of buying what you know? Specifically, investors should be on the lookout for: Companies with Inventory Growth in Proximity to Revenue Growth Companies whose inventories grow at a faster rate than their sales are more likely to be caught with obsolete inventory at a later date if sales growth suddenly slows. Companies with Accounts Receivable Growth in Proximity to Their Sales Growth Companies whose receivables stock growing at a faster clip than sales may be having trouble collecting debts. Tangible Liquid Assets Companies with a large amount of cash and other tangible hard, liquid assets tend to be more solid than those that do not. A large amount of cash and other liquid assets will provide the company with the means to pay its short-term debts and service its longer term notes even in difficult times. No investor is flawless. Here are some common investing fallacies and a step-by-step guide on how to avoid them when buying stocks. Turn frustrating hours into profit-turning minutes by managing your investing time properly. Is it better to keep your money in cash or is a down market a good time to buy stocks at a lower cost? Don't lose your shirt over these seven simple - and preventable - investment follies. Learn the technique that Buffett, Lynch and other pros used to make their fortunes. So you've finally decided to start investing. But what should you put in your portfolio? Here are some ideas to help you identify stocks that have a good chance at making you money. Find out how to review an earnings report by looking for key information about cash flow and margins, and discover the importance In the long run, firms are able to adjust all A legal agreement created by the courts between two parties who did not have a previous obligation to each other. A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. A statistical technique used to measure and quantify the level of financial risk within a firm or investment portfolio over Net Margin is the ratio of net profits to revenues for a company or business segment - typically expressed as a percentage A measure of the fair value of accounts that can change over time, such as assets and liabilities. Mark to market aims No thanks, I prefer not making money. Content Library Articles Terms Videos Guides Slideshows FAQs Calculators Chart Advisor Stock Analysis Stock Simulator FXtrader Exam Prep Quizzer Net Worth Calculator. 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