First Buys

The first problem with stocks is figuring out what to buy.

Some people buy what they know. They go out in the real world, see what's selling and buy shares of those companies.

Some people buy household names like Microsoft, GE, Panasonic and so forth.

Some people buy the stock tips they get from TV, the internet or their broker.

Some people use a stock screener to spit out a list of companies that they might like.

I tend to favor that last approach. The screener doesn't have an agenda. It doesn't care what companies pop up on the list and it's not trying to sell you anything.

Here again, there are two basic ways to screen for stocks. You can screen on technicals or fundamentals.

Technicals are basically price movements or volume that fit into a particular pattern which seems to repeat itself with some consistency.

Fundamentals are financial ratios like the PE, dividend payout ratio etc.

For this exercise, my first buys were: TNP, STP, TSP, NTE, PDS, UNT, SPIR, ULBI and TNH

TNP, NTE, UNT, PDS and TNH are all strong companies that make money and pay out a hefty dividend from their earnings.

STP, TSP,SPIR and ULBI are a bit wilder. They're not currently making money but I am hoping that they eventually start to earn cash. When they do, the price should explode upward. If they don't deliver, the price might very crash all the way to zero in short order.

That price movement (volatility) is risk. If a stock moves up 50% in two days and then dives back down 80% over the following week, it is EXTREMELY volatile and therefore VERY risky. Not many investors will have gotten out at the top and large numbers of them will be nursing their losses for a long time to come.

You can cut down on volatility by having a stop-loss. IOW: you get out of your stock at a pre-determined price level. If you buy a stock at 5$, set a limit for your losses. Let's say, 4.20$ and if the stock does hit that number, SELL it before things get worse.