Investors nowadays have access to a large number of software programs and free online services that allow them to select stocks based on a customized set of conditions and variables. Some services apply fundamental analysis to rate thousands of listed companies, perhaps on a 10-point scale, using advanced mathematical systems to determine a stock’s expected risk and return, or to simply rate it a “buy,” “hold,” or “sell.” Other methods of evaluating securities may involve technical analysis, as described in Chapter 7, Applied Systems, and Chapter 8, Formulating Your Trading Plan. There are endless ways one can approach the process, but a combination of both fundamental and technical analysis seems to be the preferred method for most investors and fund managers. Given the plethora of choices, the overriding question is still, how does one improve one’s chances of picking the stock with the best potential to go up in value? Not everyone has the stock-picking talent of Peter Lynch or Warren Buffett, or access to sophisticated quantitative stock-rating programs, so an ordinary investor or trader may often be at a disadvantage. Moreover, stock picking has almost become a lost art since the onset of the financial crisis. Sentiment has alternated between euphoria and despair, and time-proven methodologies have failed in the extraordinarily volatile environment since the financial meltdown in 2008.

This section is not meant to be a primer on how to select stocks ...

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