Highly liquid stocks or ETFs to reduce transaction costs:

• Large, optionable, profitable, & dividend paying stocks with the current price information (dividend aristocrats list)
• S&P500 Stocks Heat Map
• ETFs
• Holdings of top funds: FCNTX, CGMFX, GURU ETF
• Holdings of top investors: Warren Buffet, Green Light Capital - Guru Focus
• Mergers & Acquisition Candidates
• Insider buying reports

Prefer companies which are among the best in their industries. These are usually companies that innovate and provide unique product or service that customers want or need.

Stocks that are temporarily out of favor offer best value.

Avoid stocks that have high debt -- prefer debt less than cash or equivalents. Examples: NCT, ACAS, GNK, bank & financial stocks

Diversity among countries, sectors, industries, and asset classes.

Make sure stocks, industries, or countries are not fraudulent. Ex: Chinese RTO stocks. Test: Ask if the perpetrators will face consequences or go unpunished because of loop holes. Examples: APWR, NIVS, CSKI, CNIT

Is the product or service obsolete? Ex: Blockbuster, Borders, RIMM/NOK, etc.

Description

Description

If you cannot understand how the company makes money, stay away. Ex: ACAS, NCT

Avoid stocks that are built on just stories without proven earnings. Ex: SKINS, CMGI & other Internet bubble stocks

Unless it is for short term trading, avoid companies that sell commodity products and services that anyone else can make. Eventually, there will be oversupply and margin erosion. e.g., GNK, EXM, DRYS, and other shipping stocks in 2010-11

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My method with the latest refinements is -- start off with good value companies (broken stocks not broken companies or business models) and look for a good entry point using the technical analysis.  Even then, enter by selling Put options.  If I end up buying the stock, sell covered call options in sideways movement or take profit when the uptrend is broken.  Leave profits in an index fund or ETF.

 

Ensure that the stock is showing good price action.

• MACD is positive
• Coming out of base
• Long term trend should be good but may have weak short term trend
• Positve call option buying - huge increase from norm.