New traders and investors
often want to know what the hot shares to buy are. This
question involves a more in-depth answer, you want to know
how to determine the hot shares rather than just have
someone tell you that a certain stock is hot right now.
Without knowing why the stock is hot you really are
learning nothing and are just taking someone else's word at
face value that may or may not be founded on sound factual
information. Let's take a look at how to determine on your
own if a given stock is hot or not.
• What is the
catalyst for growth within the company?
This is an important
question to ask before buying shares in any company. You
need to know what their main growth factor is moving
forward, that is, what products or services are they
currently producing or perhaps have on the drawing boards
that will contribute to consistent longer-term growth? A
good way to find out about new company products is simply
to go to their main corporate website and read about their
plans to maintain and drive growth within the company. If
you can't really find much information that seems like it
would contribute to expansion of the company's profits,
than you may want to put this stock in the "not" category
instead of the hot shares to buy category.
• Check the annual
report
There is a plethora of
relevant and important information regarding every company
listed on the major world stock exchanges located in their
annual company report. Annual reports are in-depth
documents that describe the details of the company's
activities over the past year, as well as its plans for the
future. Some of the more important aspects of an annual
report you will want to focus your attention on include the
Chairman's report, the Director's report, and the company
financial statement. Annual company financial reports are
generally made available to the public on the company's
website for those non-shareholders who would like a
report.
• How does a
prospective hot stock compare to its
competitors?
Every company listed on the
ASX share market, or any other stock exchange is grouped
into what are known as industry sectors. Here you will find
other similarly related companies that are generally
competitors to the company you are researching. By
comparing the financial positions and factors contributing
to continued growth of other companies to the company you
are researching, you can determine whether or not a
prospective hot stock to buy is keeping pace with its
sector and its competitors.
• Don't invest
blindly
Never take anyone's hot
shares tips at face value. It is fine to get shares advice
from people you know or your stock broker, or even people
you don't know that well. But don't ever blindly buy shares
of a company JUST because someone told you the stock is
really hot. Take all shares recommendations with a grain of
salt and do your own research before you invest. Many stock
brokers have a financial self-interest to get you to trade
more; this might lead them to make less than honest stock
recommendations just to collect a commission. Similarly,
many hot stock tips come from other self-serving sources
that might be less than concerned with your financial well
being. Do your own research and get familiar with any
company before deciding they have hot shares
to buy.
