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What is the best stock to buy now? Finding stocks from stock screens and finding good stock that
also works for you is great, but what if you just want a single stock and want to know the best
single stock to buy today?
This is a good question but to answer it, this is a little bit more difficult. There are several factors
that go into a stock price, but the bottom line is it's worth currently what people are willing to pay.
So the best stock to buy now would be the stock that very few people know about, but if they did
they'd be willing to pay a lot more. In otherwords, if a company has been undervalued and
neglected for awhile, yet the companies fundamentals continue to grow, the only thing preventing
that stock from going up in value, is the institutional investors knowing about it. The future is
uncertain, but eventually people will discover this "gem" and when they do the research, they will
buy this stock all out, or at least goes the theory.
Now one trick to find good stocks are to first identify undervalued and neglected stock. Is this
going to find you only the #1 stock and nothing else? No, but there may be a top stock among that
group. How in the world are you to screen that down? Well any person can have the courage to
buy a basket of stocks and have one of them turn out, is there a way to find a stock that is a lock?
Warren Buffet thinks so, he says that diversification is a hedge against ignorance. This means that
if you know everything there is to know about a company, you can invest in a company that you
know is undervalued and that you know will grow, companies that can do so will attract more
investor money in the future. Of course this requires you to know all about Benjamin Graham and
finding deeply undervalued companies. However, there is one important thing that you may notice.
From gurufocus...
He introduced the first formula at age 79 and concluded from his results that one would have
performed quite well from 1961-1976 by buying stocks with the lowest values of these three
criteria:
A low multiple (e.g.,10) of the preceding year's earnings;
A price equal to half the previous market high ("to indicate that there has been considerable
shrinkage");
Net Asset Value. (I presume this is the lowest price relative to book value)
In his next interview published in Medical Economics, September 20, 1976 titled "The Simplest
Way to Select Bargain Stocks" Graham, then 82, proposed a simpler, more refined formula that
consisted of:
PE Ratio of 7x-10x or less (Based on 2x current triple A bond rates)*;
Equity/Asset Ration of .5 or more (e.g. Debt/Equity >1).

2. * Calculate the maximum PE by dividing (2 x triple A bond rate) by 100. Example: 7% triple A bond
would equate to PE of 7x (100/ (2×7)). If rates are below 5%, then use 10x PE max. Graham
said always buy at PE 7x or less regardless of triple A rates.
So hows this compare to the "magic formula? Again gurufocus adds this table.
Formula Comparison
Graham
Greenblatt's Magic Formula
Screen Criteria
7x-10x PE or less and
equity/assets > .5
Highest Combo of EY
and ROIC
Holding period
2 years or 50% gain, whichever came first
1 year (sale losers 1 day prior and winners 1 day after)
P/E
TTM
TTM
# of stocks
30
30
Minimum Time
5 years
3-5 years
Test period
50 years
(1926-1976)
17 years
(1988-2004)

3. Test returns
2x Dow
2x-2.5x S&P
So is that the key to finding the best stock to buy now? No, that will result in too many picks. Stock
Guru and one of the world's wealthiest men Monish pabrai says this about not Ben grahams but
Greenblatt's Magic formula
"[When looking for stock] The Magic Formula is a very good place to go hunting for fifty-cent dollar
bills. We could keep it very simple, only analyzing Magic Formula stocks day in and day out, and
become quite wealthy over time. I strongly recommend this approach. It is simple. You're shooting
fish in a small barrel, and the results are likely to be vastly superior to the indexes."
so there are many posts about this. If you want to get your magic formula stocks head on over to
However, if you want to learn more about Ben Graham he had other theories such as net asset
value.
Repetition is how we learn so I am going to repeat myself. According to my previous article titled
the "best stocks to buy now" simply knowing which stocks are best aren't enough:
If you have a 55% chance of losing everything you have and a 45% chance of winning 5 times
what you risk, that mathematically has a highly expected outcome of winning and a deal like that
may even be among the best stock to buy now (or best stocks), but if you do in fact take on the
risk of everything you have, you will lose in the long run if you take these risks. This is why risk
management is important before you determine the best stocks to buy.
Okay, so I am not going to do the work for you, because I believe that you learn by doing,
however, I am going to give you a ste by step process that should help you identify 1 single quality
stock. I believe that in this world of free stock advice, it's easy to get wrapped up in information
overload and struggle to identify the one single stock worth owning right now.
So how do you find the best stock to buy now?
1.) To start with screen stocks by using for the Magic Formula. You have to log in and create an
account before you can use the screener but it is free to do so.
2.) Using that list come up with the top 100 that are above a market cap of at least 50. The small
market cap stocks require different money management strategies as you need to have more
money on the side and/or holding it for a longer period of time so the volitility doesn't effect you in
a bad way.
3.) From that list, take the top 20% of stocks of ROIC (return on investment capital) in this case 20
stocks

4. 4.) From the list of 20, enter the ticker and figure out the top 20% or in this case the top 4
equity/asset ratio.
5.) From this list of 4, buy the stock with the lowest P/E of the previous earnings. If the P/E is not
under 10, you must screen again, this time starting with 200, then take the top 40 stocks with the
highest ROIC, and then the top 8 and from those 8 you should be able to find 1 or 2.
Of course as I hinted at before, I believe that neglected stock are among the best stock to buy
now, or at least the best stocks to buy as of October 2009. This may change if you have a shorter
time perspective. I consider this trading more so than investing, and if you are trading, you may
like breakouts from undiscovered companies that are surging on huge colume. I prefer to do my
research once or twice a year, find a handful of good stocks, and then not have to spend any time
thinking about it, but that's just me.
Now I don't just toss away the best 4, because just because 1 stock appears better, doesn't mean
the others aren't goods stocks as well. I prefer to do a little bit more in depth research on the
management of the company, and assets, and balance sheets, and so on. The longer you intend
on holding it, the more that you should do additional research. Perhaps you continue this process
every month throughout the year until you find one that meets this manual screen, and from that,
you have to find the stocks that meet your own personal requirements.
So is it possible to find the best stock to buy now? It's certainly not guaranteed, and right now it's
only an opinion on a method to find the best, not an actual fact. You may have other people that
completely disagree with that statement. The only thing that is certain is uncertainty. The only
thing that you can be confident about is that people will not always be confident. History has
shown us that the factors contained in this strategy will help identify valuable stocks. However time
will tell whether or not this is the best stock to buy now, or if it should be avoided.
You can learn how to find the best stock to buy, and other useful posts at the best stocks blog. If
you've ever wanted to find a list of some of the best stocks to buy now, check it out.
Article Source:
http://EzineArticles.com/?expert=John_Rockefeller
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