How does one determine which stocks will be profitible and which ones will not?

[agreeablecan773]

I am vastly interested in the stock market, yet know little about how one chooses the best stocks and how one determines which will be a total loss. Is it even a good idea to get involved with the stock market since many seem that many of the richest have a monopoly and use computer programs and such to determine the best stocks. Can a little guy which little seed money actually make a lot off the stock market or are the odds against me? thank you

[Auroch]

Just remember - there's crooks on Wall Street who are just waiting to take any little bit of money you want to invest. So be real careful. If you have money, you might just want to throw it in the street and watch drunks fight over it instead of giving it to some crooked billionaire.

[The]

It depends on
1) Luck
2) Insider news
3) Knowledge of company or stock profiles
4) How much are you investing?
5) How long can you stomach the weather or prolonged drought?

1) Luck
Luck or to put it better way, people's emotion fluctuating towards your favor. The stock you invested might be overhyped or trending for a couple of weeks while people are investing that stock.If you could make a profit during that period, of course you're lucky. But who knows? Everybody's waiting and speculating if the stock price will go up tomorrow. It is basically greed vs reality check.

2) Insider news
You'd never know what's happening inside the company whose share you invested. They might be developing new technology or new products. Or they might be laying off employees. Only inside people know the company best. If they're buying their company stock a lot, there's common perception that there might be major progress in the company or brilliant performance of the company over the years.

3) Knowledge of the company
You can invest in IT, Warehouse, Transportation, Minerals, Mining, Wire, and such. How much of shares are being traded each day and which area of the business the company serves? Basically companies providing or manufacturing products tend to fluctuate price within a range. For eg. Apple, Google, Verizon, Star Bulk Carrier and such. Their prices do fluctuate, mostly depending on products and how good their products are. Some stocks tend to fluctuate widely, relying much on investors emotion. For eg, Zynga and Facebook. They don't manufacture products. They provide entertainment.

4) How much are you investing?
If you're investing a lot, you must carefully choose which stock to hold and their future prospect. You don't invest in just because the company and stocks are popular, but you don't see any prospect in them. That is not to mean you shouldn't be careful when choosing cheap stocks.

5) How long can you stomach the bad weather?
Normally you must be able to withstand the prolonged drought for at least 3 months; the reason being companies announce their quarterly profit and if they don't make the cut, the stock price goes down until they update another quarterly profit. This could go for years until their price come back to where they were before. Everybody's speculating.

Here comes a complicated scenario. Some are said to manipulate their stock prices. They let their stock plummet where they can buy with cheaper prices. Then they announce higher profit returning and stock price goes up and they sell it. Although it is unethical, you never know if there has ever been such a practice. For major investment banks, even a slightest changes in stock price to cents can render a huge profit or loss to them.

[Paul]

You can't. But it's not all bad news. If you diversify your portfolio then even if some of your stocks go down in value, over time your entire portfolio should still go up. By quality stocks and buy for the long term. Trying to "beat the market" is a mugs game.

[raysor]

It's called knowledge!
Firstly you have to realise that most of the published data, research, recommendations etc. has a hidden agenda. So you never follow it blindly. Use it as a source of information but do not just follow it. Secondly the market is trying to discount the future so basically current prices have taken into account future (6-12 months?) events.
Thirdly avoid smaller companies as these are very vulnerable to lots of events. For example a small oil explorer: Whilst it is exploring there will be lots of speculative hope and the share price will be way over-valued. The odds of striking a big oil find are quite remote but if it is found that there is less oil than speculated, or un-commercial to extract then the shares will be worth next to nothing.
So I would suggest the leading companies that have strong government, strong balance sheets (lots of cash and assets), good cash flow, a product or service that is always in demand, and a business that is relatively easy to understand.
Fourthly, always buy for a reason, even if your reasoning is unknowlingly flawed and then sell when that reasoning is no longer valid or comes to fruition.