Long-term investments. How to Select Different Types of Stocks?

Any trader who has decided to exit intraday trading with the question of what criteria should select types of Stocks for long-term investments and what should first-hand.

The trader should start with the simplest – first, look at those indexes that appear on the web and are available to every investor who does not want to go into details.

Issuer’s profit, earnings per share (annualized), dividend yield, i.e., what we see is the primary: issuer’s income, earnings per share (annualized), dividend yield. Therefore, before proceeding with long-term investments, it is crucial to determine the type of income that you plan to receive from your assets; which can into three groups:

• Dividend yield
• Profitability of shares of undervalued companies
• Profitability of shares of promising companies

Dividend yield;

the analysis is the search for stocks with a good dividend yield, which is reflected even in the company’s review, i.e., There is no need to delve into the company’s financial information. The investor can calculate the possible profit, bearing in mind the previous data on the payment of dividends.

In the worst case, their shares in a range or the shares fall in price along with a decline in stock indices, i.e., almost all stocks trading on the market will fall in price. Using this tactic, you can wait until the difficult times in the market pass, while your deposit grows every year; and if the shares rise in value, you will have additional income, which may be several times the amount of your investment.

For example, the world’s largest investment company BlackRock (BLK), which manages more than $6.5 trillion, currently pays $12.02 per share, which is 2.5%;

The income is not very large, but the company regularly pays dividends, and over the past ten years, the price of its shares has increased ten times. Blackrock Inc.

For example, you can make up your portfolio of companies that spend the most money on paying dividends. Such payments reduce the capitalization of the company, and money does not participate in the further development issuer;

Thus, we can say that only financially stable companies can afford high dividends, which means that there is a possibility that their shares may rise in price. Below is an example of how companies spend the most money on tips:

None of these stocks have shown negative profitability over the past ten years, while some have 100% profitability. Suggests that you should not rely solely on one company, as this increases the likelihood of a wrong choice; moreover, you should take force majeure circumstances into account, which can worsen the business of only one company;

It should consist of different securities and different sectors of the economy.

A high dividend yield percentage. However, this approach is riskier since there is a possibility of buying shares of a company that will go bankrupt in the future. Instead, it would help if you studied the dynamics of payments, how long the company pays dividends, how often it delivers, and how the shares react to charges.

For example, there is an issuer dividend yield of more than 85%, and the share price declining for the last three years. The company itself is working with constant losses. In such a situation, it can conclude that earlier shareholders took most of the company’s profits, not allowing it to invest in its development.

Therefore, very high dividends can worsen the long-term performance of the issuer, and in such a the dividend yield will not cover caused by a decrease in stocks. In any case, we can go more modestly and pay attention to the issuer’s lower dividend yield and net profit.

For example, the well-known Ford (F) spends about $ 3 billion on dividends, their yield is 5.9%, but after all payments, the company still has more than $ 1 billion in net profit that can focus on its further development;

Moreover, its shares are now trading at a minimum for ten years, making them attractive to investors.

In general, significant dividends (compared to the company’s competitors) and the availability of net profits can be a more reliable source of information when searching for a suitable stock for a long-term portfolio than just high returns.

Undervalued  Stocks companies

Another effective way to trade is to search for undervalued companies by investors, especially in a growing market.

There are specific criteria for determining the issuer’s shares;

Unfortunately, this does not mean that the shares will soon rise in price, simply because it requires other market participants to pay attention to these shares and buy them for sure; otherwise, the lack of demand will lead to a decrease in price. On the one hand, the market is elementary: if there is increased demand, stocks rise; if supply increases, the stock falls.

Suppose you managed to find a company whose shares should be worth several times more, then, in your opinion. However, in that case, this will not necessarily lead to their growth until the view of other investors matches yours.

At the same time, analysts’ recommendations, publications of rating agencies, and company management forecasts attract investors’ attention to stocks that they consider undervalued; simultaneously, definitions of undervalued conditions may differ. Moreover, the development of new technologies has correspondingly improved the search for such supplies. Currently, there are many algorithms on the market for calculating company coefficients to search for undervalued stocks; so if you managed to find it first, you wouldn’t have to wait long.

In our case, let’s look at a simple example of searching for such a stock, particularly a comparative analysis of competing companies, in a recent article about Nvidia (NVDA). I compared three companies, and the shares of one of them turned out to be in almost all aspects; it was Micron (MU).