A tough job is researching the stock markets to find the best deal on company stocks to invest your money. Your goal is to purchase a security at a low share price that has the potential to grow in the future, but you don’t know where to look. Brokerages are the first place to search and screen stocks and sort by industry sector and other criteria.
You can research those businesses and retrieve decision-making information about price target changes, stock ratings, and recommendations from professional analysts to buy, hold, or sell a stock. For example, Devon Energy is a stock listed on the New York Stock Exchange as NYSE DVN, with 18 Wall Street analysts giving it a buy recommendation. They believe the company is a great deal and possibly can outperform the market.
Four Ways You Can Find a Cheap Stock
1. Choose a Brokerage With a Stock Screener
Online brokerages have stock screeners that allow you to customize your searches and lists of companies. You must open an account and deposit cash before you can start trading online.
2. Analyze the Company’s Forecast of Future Earnings Growth Rate
You can evaluate potential sales and earnings growth to determine if companies are in a positive financial position over a five-year timeline or longer. Investors usually research the company before they buy a stock and review its income and balance sheet statements.
3. Apply the Price/Earnings (P/E) Ratio to Find Low-Cost Stocks
These criteria on stock screeners allow you to look up cheap stocks that will probably offer you a reasonable profit on your investment. You can shorten your undervalued stocks to the best picks based on market caps and the P/E ratio.
4. Use the Market Cap Feature to Avoid Risks
Market caps of company stocks are significant in reducing risks involved in investment products and securities. A stock screener enables you to make a list of stocks analysts believe will grow earnings in the future.
Reasons to Diversify Your Investment Portfolio
After you do your research and analysis on company stocks, select different industry sectors for diversification to protect your invested capital. Consider the real estate sector to invest your money for an instant. You can invest in multi-family properties, commercial real estate, and REITs to balance portfolio risks. An investor may select a multi-family property because it is easier to manage tenants. Commercial real estate is a yielding security that provides a higher return on investments (ROIs). If you want to earn passive income, REITs or real estate investment trusts will add value to your portfolio.
Types of Accounts Offered by Brokers and Brokerages
The two types of accounts brokers and brokerage firms offer to investors are cash and margin. A cash brokerage account requires investors to deposit enough funds to cover the purchases of stocks. They cannot borrow funds from the broker to pay for a stock transaction. A broker allows you to open a margin brokerage account and borrow cash to buy securities. Brokerages use your securities as collateral for the loan, and you have to pay interest when using borrowed funds to buy a security on margin.
Margin Securities Risks
- The value of a stock or security can decline, and you can lose your money. When this happens, deposit money in your account immediately
- The brokerage can sell your securities without giving you notice when there are any shortfalls in your investment
- A brokerage firm may change the threshold, forcing the investor to a margin call
Before opening an account with a broker or brokerage investment firm, do as much research as possible. You will need to research the brokers and firms to make sure they are legit and to avoid scams. If you find a reputable brokerage, you will have access to a trading platform that features a search screener to make a list of preferred company stocks based on your criterion.
You can search for stocks on NYSE, NASDAQ, and other stock exchanges in the US and other countries. Remember to research the companies and collect information on their future earnings and sales growth, P/E ratio, and market caps. Your works will likely payoff short-term or long-term when selecting undervalued stocks to include in your portfolio.