There’s no one absolute checklist that can tell whether a stock is attractive, but there are signs that bode well for any stock. Below are four:
Rising Earnings Estimates: Buying into rising estimates increases the chance that more good news is coming. WSJ.com and Yahoo Finance are among sites whose stock-quote pages show current earnings estimates as well as how those estimates have changed in recent months.
Room for a Higher Valuation: Value investing works. That is, shares that are inexpensive relative to some measure of economic appeal, like earnings, tend to outperform those that are expensive over long time periods. Not every cheap stock shines and not every pricey one flops, but most investors will improve their odds of success by sticking with modest valuations.
Growing Dividends: Dividends provide far more than income. Payment hikes signal confidence, because managers are loath to cut payments, and so tend to increase them judiciously. Favour moderate yields with healthy payment increases over high yields with little growth.
Executive Buying: Managers use their deep experience and close view of daily operations gives them an informational advantage most investors can’t match.
(Source: Wall Street Journal).
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