Kinds of stocks

When it comes to investing in stocks, there are many ways to look at them. There are numbers to look at, potential to consider, and many other factors. Here are a few classification on analyzing stocks.

1. Value -- if you want to buy value stock, you're probably going to look at things like P/E, Earnings per share, etc. The idea is that the company is going to make good profit, so it makes the stock a good value.

2. Growth -- Remember the dot com days? There are stocks out there that people were buying thinking that it has the potential to grow, regardless of what the P/E were. That's purchasing growth stock.

3. Income -- A lot of companies give out dividends for the stock holders. Some people buy stocks for the good dividends.

4. GARP - grow at reasonable price. Growth + Value + share price that is cheaper than the company is worth that is. The company has good potential to grow, but the stock price and numbers also look good. One of the most common GARP approaches is to buy stocks when the P/E ratio is lower than the rate at which earnings per share can grow in the future.

5. Quality - Growth + Value+ GARP. Basically you look at everything. And things like management competence, Return on equity. Warren Buffet follows this.


Next time : Analyzing numbers.