How to Identify Good Stocks to Buy

by Contributor ; Updated July 27, 2017

It can often be confusing trying to find good stocks to buy. With all of the analyst and stock reports from various sources giving buy or sell ratings, it is hard to know what is good or bad information. There is so much information available today, it is virtually impossible to keep it all straight. There are, however, a few ways that you can identify attractive stocks that can fit into your portfolio. Here are a few steps you can follow to identify good stocks to buy.

Step 1

Pick stocks from sectors and markets that you know and have experience in. Whether it is from your current job or familiarity in a certain industry, trading stocks that you know can give you an added advantage. This experience that you may have in a particular sector can be a great asset to find good stocks to buy.

Step 2

Select stocks with sound fundamentals as a way to identify good stocks to buy. Companies with good balance sheets will always be a better value compared to their competitors. Look for corporations that have a long-term history of paying and raising quarterly dividends.

Step 3

Compare your identified list of stocks against its peers in the same industry or sector. This is very important information that can assist you in finding good stocks to buy. Looking a competing companies and their fundamentals can be a great way to size up a potential investment.

Step 4

Stay away from companies with high amounts of debt when looking to find good stocks to buy. As most investors have found out recently, it can be very difficult for companies with large amounts of debt to survive, especially in recessionary times.

Step 5

Look for companies with strong projected long-term growth as a way to find good stocks to buy. While it is important to look at historical and present financial data, you should also focus some of your investigation on the future outlook. Companies with questionable long-term growth potential are not a very promising investment.


  • Use technical indicators as another tool for identifying good stocks to buy. Always complete your due diligence when you are considering buying or even selling a stock.