Finding Good Stocks to Buy

Compare Stocks to Peers, Industry Sector to Measure Performance

By Ken Little, About.com

It is never easy picking good stocks, however during very difficult economic times it becomes more important than ever.

When the economy and the market are racing for the bottom, they can drag down good companies along with the bad.

A troubled economy tends to strip away any growth weak companies enjoyed in previous growth cycles.

However, because good companies may suffer also, investors need a way to judge a company’s performance.

One way investors can take the pulse of a potential investment is to compare how the company is performing relative to its peers.

Yahoo! Finance offers a way you can compare how a company is doing relative to its industry sector and its peers.

Click on the “Investing” tab and choose “Stocks.” On this page, look for the link to “Sector/Industry Analysis.”

This link takes you to a page that compares the various industry sectors. Other online providers may have a different way of identifying sectors.

Here’s how you can use this information.

Let’s say you are interested in IBM. Click on the “Technology” tab. IBM is in the Diversified Computer Systems sub-group.

If you don’t know where a company is classified, look up its quote and go to the Profile page. How Yahoo! classifies a company is listed in its profile.

Click on the Diversified Computer Systems and you will find a list of the companies in that sub-group. Each company will have a number of financial ratios listed.

At the top of the list are the corresponding numbers for the whole Technology sector as well as numbers for the Diversified Computer Systems group.

You can compare IBM or any other company with the sector and sub-group as well as comparing the company with its peers – such as comparing IBM and Hewlett-Packard.

If you want, you can download this information to a spreadsheet such as Microsoft’s Excel.

This is not a recommendation for IBM or Hewlett-Packard and other online providers of financial information offer similar capabilities as Yahoo!.

Always check current news about a potential investment for any late-breaking announcements and so on that may impact your decision.

Investors have a tremendous amount of information at their fingertips. There is no excuse for making investment decisions in the dark.