How to Choose Stock

Everyone has an opinion as to how to attack the stock market, and of course, I am no exception. I believe there are certain types of stocks that a person should include in their portfolio. They are as follows:

First, and always, a person should be looking for those stocks where the companies reinvent themselves. Netflix is a great example. Netflix looked as if they were down for the count. They had been duking it out with Blockbuster in a price war and losing. Blockbuster had a big advantage in having physical stores for customers to return their videos if they wanted to get a movie faster. Then Netflix went into video streaming and OMG! According to The Motley Fool their stock has gone up 303% since 2002.

Speaking of The Motley Fool, he is someone every Joe Blow who is interested in the stock market should know about. The Fool writes about the market in plain English, and he has received the appropriate nods by the powers that be in Fortune Magazine, The Economist, Barons, and so on. The Fool will send you lots of free information if you sign up for it - oh, sure, he's trying to sell you something, The Fool is not fool - but nothing says you have to buy. Read the free stuff, and save your money for buying stocks.

The second kind of stock that I like is those that pay dividends. Some people are divided on this, but I am definitely pro-dividend. I use my dividends to buy more stock. A reinvestment strategy is the way to go in my opinion if you're in it for the long haul. However, don't just go in and buy any old stock that pays dividends. Look for a stock that has been paying dividends for a long, long time and even paid out during the most recent financial crisis. Duke Energy, Bristol Myers Squibb, and Southern Copper are good examples. Some even increased their dividends during recent times. Kraft just makes me purr because it not only keeps increasing its dividends, but I got that stock for free when Altria did its split.

That is the third kind of stock I like - those that have more than one strong company included because those are the ones that are more likely to split. While stock splits seldom happen, it is a juicy event when it does. Furthermore, even if it doesn't, you have more than one big company to help keep the stock price up.

The fourth kind of stock I like really requires some research on your part. I like those that do a lot of research and development. Sometimes these companies don't look very good today, but usually they pan out later. These are often the ones you should consider your riskier investments.

The sixth type of stock I like are stocks that are from companies I use. Some people think this is silly, but I figure if it is a product I use, I'm more likely to give a hoot about the whole thing. I'll talk up the product to my friends, and so on.

And lastly, the final kind of stock I like is the kind of product or service that people can't do without even in bad economic times. Wal-Mart is a great example. Wal-Mart continues to do very well despite the fact that people, in general, aren't spending their money. Nevertheless, Wal-Mart's parking lot remains jam packed. Why? Because they sell everything, food, clothing, "stuff" and they sell them at prices just a wee bit lower than everyone else (not always, but people think they do) so that people wanting to save a nickel crowd to Wal-Mart.

Not only is Wal-Mart selling something that people can't do without, but they give dividends, so they are a double whammy when it comes to a great stock pick.

Now my stock picks are my opinions, just that, opinions. There are lots of opinions out there. But if you don't start investing, you won't make any money. Sure, it is a gamble. But so is life.

http://www.fool.com/investing/dividends-income/2010/02/26/9-dividend-divas.aspx