Buy Quality Cheap Stocks using Investors' Business Daily

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Buy Quality Cheap Stocks using Investors' Business Daily

By: Joelle Chan

About Investor's Business Daily

The Investors' Business Daily is a daily investment newspaper that is read by many financial professionals, and mentioned in many bestselling books (including Peter Navarro's “When the Market moves, will you be ready?”, Jason Kelly's “The Neatest Little Guide to Stock Market Investing” and Stan Weinstein's “Secrets for Profiting in Bull and Bear Markets”). IBD provides detailed information about stocks; such as detailed, concise statistics about a company's earnings, stock price action, and other criteria to help investors find top rated stocks.

Using IBD to find Quality Cheap Stocks

[This step is only for subscribers of the Digital Edition]
Log in to IBD and click on eIBD – Digital Edition. Follow the on-screen instructions until you reach the front page of the newspaper.

Look for the section “Making Money”.

Choose “Top Ranked Low Price Stocks”.

Look through the stock list and find stocks that satisfies the following criteria**:
Smartselect Composite Rating > 80
EPS (Earnings Per Share) > 70
RS (Relative Strength) > 70
AccDis at least a B
Closing Price should ideally be above the 52 week high (this means the stock has just made a NEW 52 week high, which is a very bullish signal)

That's all. A simple 4 steps procedure for finding top quality cheap stocks. However, you should note that stocks trading under $10 tend to have lower volume, which makes them more susceptible to stock price manipulation. Therefore, please be careful when investing in such cheap stocks. Personally, I combine IBD's ratings with my own technical analysis and I allocate only 10% of my account to investing in cheap stocks.

** Data Definition (Taken from IBD website)

Earnings Per Share (EPS) Rating

An exclusive rating found in Investor's Business Daily. Stocks are rated on a 1 to 99 scale (with 99 being best) comparing a company's earnings per share growth on both a current and annual basis with all other publicly traded companies in the William O'Neil + Co database.

Stocks with EPS Ratings of 80 or above have outperformed 80% of all publicly traded companies in earnings.

The EPS Rating calculation combines the company's most recent two quarters of earnings-per-share growth, with its three-year to five-year annual growth rate.

Relative Price Strength (RS) Rating

This is another exclusive rating in Investor's Business Daily. It measures each stock's price performance over a twelve-month period, compared to all other stocks.

Accumulation/Distribution (Acc/Dis™) Rating

The Acc/Dis rating tracks the relative degree of institutional buying (accumulation) and selling (distribution) in a particular stock over the last 13 weeks. Updated daily, stocks are rated on an A+ to E scale.
A = Heavy buying
B = Moderate buying
C = Equal amount of buying and selling
D = Moderate selling
E = Heavy selling

SmartSelect® Composite Rating

The IBD SmartSelect Composite Rating combines 5 proprietary IBD Ratings into one easy-to-use rating. More weight is placed on EPS and RS Rating, and the stock's percent off its 52-week high is also included in the formula. Results are then compared to all other companies, and each company is assigned a rating from 1-99 with 99 being the best. A 90 rating means that the stock has outperformed 90% of all other stocks in terms of its combined SmartSelect Ratings.

Article Source: http://www.find-investment-advice.com

Joelle has invested in the stock market for more than 5 years and has successfully used various investment strategies to consistently make money from the stock market. She offers free top quality investment tips at how-to-invest-in-stocks.blogspot.com/

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