Mastering the Stock-Picking Techniques:
How to Choose Stocks that Will Fly

Your success in stock investing is, to a large measure, a function of how well you select the stocks you buy. If you get it right - able to buy, most times, stocks that will sooner or later be breaking into a significant upward price movement - and you learn to sell in a timely manner, your profit-making capacity is bound to be awesome. Much as this would be an ideal to strive for, the reality is that it is not so easy to get such killer operational framework into place. Yet, just an above-average performance in the regard may just be enough to provide you satisfactory returns. So, how do you deploy an effective stock selection strategy?

If you expect a script that you plug in and it churns out a list of winner stocks, you are unlikely to find. Stock prices get influenced by a lot of not easily predictable factors, including investor sentiment, some times bothering on irrationality, making it so much of a moving target. Precision is therefore not a word to apply. Yet, many investors find a way with the market and still select stocks that make them good money. Experience has shown that varied stock picking strategies have, interestingly, been use to produce such good results. Some apply complicated analytical tools, others don't. Perhaps, success lies more in how well you understand what you are using, and how consistently and doggedly you apply it. In effect, it may just be more important to master and optimise one approach, than to bother to know all or begin to determine which will consistently yield a better result. Having said that, here are a few stock selection techiques that could be said to be dominant:

• You Got It Wrong, So Cut Your Loss
  You did all the research and thought you had it on target, but, surprise, surprise - it hasn't played out that way. Instead of moving up, the stock is sliding. Do you watch your money slide too, just because you can't come to terms with a mistake that is both human and common? No, it happens all the time. No expert gets it right always and you only need a few good wins to achieve the breakthrough you want. So, cut the loss and move on. At what point? That's why you need a limit, preset. A suggestion: Keep it at below 10%. On a stock bought at N100, that limits it to N90 or above. With hard work, you will recover that loss elsewhere, sooner than you think. Analyse the situation and if there are lessons, learn them, but get your money working elsewhere.
• Ding-Dong Performance
  What if the stock hasn't really nose-dived but is just not living it up? The implication here is that your money is just sitting, not losing value (except to inflation), but obviously not generating wealth for you. Selling off isn't as desperate a case as when your investment is whittling down, but for how long will you hold out? That decision will have to be made as to how much time it's justified to give this stock to see if it wakes up. That allows you to do more evaluation about the fundamentals of the company. If the stock isn't going to turn in a good return in a reasonable time, other opportunities should exist. The bottom-line: switch, if you can't justifying carrying a seeming dead weight.
• Ridding a Winning Stock
  This time you got it right and just as projected, the stock is heading nicely up. That's what the investor prays for all the time. There are traps, all the same.
  
  One, because you might be afraid that the climb could reverse suddenly, you could sell off even before the real drive has started. That hasty action cuts off so much of the potential profit. You possibly won't forgive yourself, but the harm is done, especially if you don't have the nerve to re-enter.
  
  Or you hang on expecting a longer stretch of a bull run, but find, suddenly, that the price is on the decline. You wait, believing it's a correction before another burst of upward ride, but alas, it goes heading down.
  
  These things happen to investors all the time. How can you manage the success ride to utmost advantage, selling only when you really should? .
• Major Portfolio Purchases
  Think of what happened each time Pencom (the pension funds regulator) released funds to pension funds administrators. At other times, it could be foreign portfolio managers. The point is that when a particular stock or group of stocks gets targeted by major institutional investors and portfolio managers, they mop up the stock and invariably create a dearth of supply. For as long as that mop-up continues, prices will keep heading up. When such situations present, it's a chance to earn a good margin. How do you know when? You have to track mar

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