Investment Indicators

Investment Indicators

Last Updated by WikiWealth



Investment indicators help to identify characteristics of good investments. Buy indicators may show that a company's value will increase; the opposite is true for sell indicators. Although indicators are important, they can not replace a full analysis of a stock. They are best used to augment a full analysis of a company when you seek additional evidence to support your conclusion. WikiWealth only has data for a few indicators. General market mood and company specific news will provide evidence for many indicators.

Buy Indicators

  • Insider Buying: If the firm's management is buying shares of your target company, then that company must be valuable enough for regular investors to profit. Management will run the business with my at stake, so their interest are more aligned with the companies investors.
  • Share buybacks: Management can buy back shares of their company if they think the price is too low. This decreases shares outstanding and increases the value of the shares to current holders.
  • Takeover Speculation: This helps to increase the price of undervalued companies, because it means that prices were low enough for a firm to see value in the company. Takeovers historically pay a premium on the shares of companies they take over.
  • Analyst upgrades: This brings publicity to a share price that has considerable value to investors. Since analyst are always late to upgrade a stock, this trend simply adds momentum to stock prices that are already going up. To find stocks that are ready to start moving up, just look for companies with low initial ratings and plenty of room for upgrades.
  • General gloom and doom: when their is blood on Wall Street, it is time to buy. Buy low, sell high? These maxims develop, because during times of market turmoil, smart investors buy good companies. To find the best companies, it's important to look through WikiWealth's stock research.

Sell Indicators

  • Insider Selling: If the firm's management is selling shares of your target company, then that company must be at a high enough level that management thinks is good enough to sell and take some money into other investments. Management could sell for many reasons that don't affect the value of a firm such as, diversification benefits for management and generally paying their personal bills. However, if large parts of management suddenly sell abnormally large amounts of their shares, this might by a problem and indicate that the company's share price is too high.
  • High turnover of the executive team could indicate internal problems with management. It also decreases the amount of experience that is available to run the business.
  • High Analyst ratings: since typical Wall Street analyst are typically wrong on the general direction of a stock price movement, high ratings may indicate a potential fall in price. Whilst the price falls, analyst generally decrease their forecast for no other reason than the price is falling, which only adds to the negative momentum of the stock value.
  • General euphoria is indicated when everyone indicates to you that the next best investment is …. for example, dot com stock, or house flipping or a new drug. The next best thing general proceeds the next biggest implosion or bust. With so much money chasing terrible investments, it is best to look the other way for investments with real value, but are over looked.
  • Corp Governance and Pay: when management incentives do not equal investor incentives then management doesn't make decisions based on the benefits of their investors. See Lehman Brothers for example of how the entire company can go bankrupt, but the CEO makes more money than a small African country.