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Individual Stocks

Selecting Individual Stocks

What are some other considerations when I try to identify individual equity target companies?

There are many different considerations when investors try to distinguish winning stocks from potential problem stocks. Some experts who seek undervalued companies understand that the value of a company may be quite different in the future than it is today. A company may have a short-term management problem that may be solved next month. Meanwhile, the broad investor market may have already abandoned the company, thereby depressing its price. Value investors look very specifically at companies that appear undervalued to try to see if they have the ability to correct themselves over time. Other experts look closely at companies’ and their competitors’ debt to measure the strength of the target company’s financial position. A company that is ready and able to clear away debt may be viewed more favorably than a company that cannot seem to get out of debt. Debt can depress a company’s earnings, and can also cause a company eventually to fold and declare bankruptcy.



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