I have to chuckle every time I hear this question. It’s almost like saying, “What’s a good car to buy?”. It depends.
Let’s make up a hypothetical case. Let’s say I have $10K I am willing to gamble short-term in the market. I don’t want to be a buy-and-holder, I want to get in and out, maximum holding time of say 3 months.
So, what’s a good stock to buy?
Livestock! If they go down in value at least you could eat them! 
Whatever you use the most of…over the years. In other words, if you like a certain type of shoe, or a certain car, restaurant, etc., invest in it. If you don’t even recognize a companies product after researching it, don’t. It’s not much for being ahead of the curve, but if you like something, chances are others will, and despite what some people say, there’s safety in numbers, even in wall street. Very rarely will you be the last in, and the last out of a stock. You might not become rich overnight, but over years isn’t bad either.
I don’t have a license to suggest specific stocks. I might buy some blue chip stocks, they are pretty stable. No, not the company, ‘blue chip’.
So many brokers advised me to buy blue chip stocks that I went my own way and cornered the chunky salsa market. You gotta think forward, those blue chips are tasty, but a tad dry.
Pretty good advice. You should probably subscribe to something like “Motley Fool” newsletter. Their portfolios do exceptionally well.
Castelle - Faxing and printing systems, over local area networks, and the Internet.
Loudeye - One of the meanies behind the new pay-for-music-downloads. They hold the largest collection of downloadable music.
Voxware - Voice recongition systems for the logistics, distribution and package sorting industries. Currently has contracts with UPS, FedEx, and the U.S. Postal Service.
Those would be my picks today. Tommorrow I might change my mind though 
Okay, I’ll be brave: Netflix, eBay, Marvel, Corporate Executive Board, Possis. You’ll have to do your own research, though.
Ok I’m going to attempt to be serious here.
BEFORE you start looking at individual stocks you need to make sure the rest of your financial household is in place. As far as risk is concerned with a 1 being safe and a 10 being total risk indivdual stocks run about a 7 or 8. Things that need to be in place BEFORE you look for that hot stock are:
Insurance: Life, health, disability, home owner’s, auto, liability, etc.
Savings: Liquidity of AT LEAST 3 month’s salary (preferably 6 months)
Participation in employer sponsored retirement plans. All too often people don’t take advantage of the match contributions some employers make when the employee contributes. If you are not maximizing this feature then BEFORE you go on your own take full advantage of this.
Know your investment goals. Answer these following questions. A) What is the intention of this investment? B) How long can I aford to go without the invested funds (ie. your investment time horizon) C) What kind of risk can I sleep with? If the flucuation of your investment causes you to lose sleep you don’t need to be invested in it.
Don’t forget about taxes and IRS rules when investing. You could actually cost yourself all your returns if you run amiss of the IRS on this.
Ok after you have spent all the money you thought you could invest by covering all the aformentioned bases and you still have some left over THEN you may consider investing.
Before you consider individual stocks refer back to questions A, B & C. I have seen too many sure bets on the stock market go up in smoke over the years because people talk themselves into something and are blinded to influences which would cause them to reconsider their investment.
There are a vast array of mutual funds, annuities and other less risky investments which allow you to participate in the stock market yet practice diversity and secure professional management. If you start buying stocks how will you know when to buy and when to sell? Are you going to rely on a broker? Remember, brokers get paid based on transactions. So a broker will be calling you to get you to buy something or sell something because they get a commission. Believe it or not the average broker doesn’t know more about the market and what to buy or sell than many of the “lay investors”.
Before you go down this course its best to meet with an advisor. Discuss with them your expectations and your risk tolerance. Get educated on investment issues from them and other sources. A good advisor will take the time to get to know you and your needs and try to address all of them before you get to the actual selection process of individual securities.
Which advisor is best? Why not ask some people who have had good success with an advisor which they could recommend? Is a fee only advisor what you need? Depends, but remember a fee only advisors still earn trail fees on assets under management so the investments they will recommend may be limited to the ones which they get paid these fee. Do you need to pay an advisor fee? No, is the short answer. A lot of advisors can do the same work for free which a fee-only advisor does. Just because the service is free does not make it any less valuable. Remember though all advisors will receive a fee for their services. That’s how they get paid.
Can you save the fees and go it alone? Yes, but would you also perform brain surgery on yourself after you have studied the procedure? I think not. Investing requires costs either in the form of fees or commissions or in losses in investments made with out any advice.
I played the market for about 19 years from 1980 to 1999 and have since moved out to mutual funds and variable annuities. Why you ask? Because I don’t need the risks associated with owning individual stocks and I prefer the professional management of the mutuals and annuities. Besides my investment time horizon will allow me sufficient time to meet my desired goals.
To sum up:
Any investment’s success is tied to 3 things. First how long will you be investing? Second how much will you invest over your investing time frame and lastly what kind of return can you expect?
I have seen WAY too many people focus on returns.
They forget it requires time IN the market not market TIMING.
They also fail to realize the amount of capital needed to actually be an investor. They also fail to continually invest every week or month pumping in new capital on a regular basis.
A personal example:
I have seen two people inherit about $1,000,000 and within two years the one who followed the advice of a trained advisor nearly doubled their inheritance while the other who decided that day trading was the way to go and lost about $500,000.
I cannot stress enough though the first 3 points I made about what needs to be done BEFORE you start picking stocks. If you don’t do these steps then you are setting yourself up for financial ruin. Believe it or not I’ve seen it way too many times before and I’ll see it way too many times in the future because people are just plain dumb when it comes to money management.
Really good advice. Motley Fool’s boards turned me on to Hip Interactive (TSE) last holiday season at 71 cents a share. Not lottery odds, but a decent horse tip from a total stranger.
Great post **SunTzu2U[\B]. I agree with every word you said, 100 percent.
Granted, a person should do all that you mentioned before playing with individual stocks. And the average person should probably not play with individual stocks at all. I’m not advocating that anyone become a speculative trader in individual stocks. I was just wondering if there are any others out there who buy and sell stocks regularly (like I do) and perhaps have some interesting stocks they are watching.
SDMB probably isn’t the proper venue for this type of discussion. Maybe I should leave this topic for the Yahoo stock message boards.
Bottom line, no harm done. At the very least, anyone that reads your post just got a free visit with a certified financial planner.
Thanks for the compliment CC!
This strategy has worked pretty well for me, and I think it’s good advice overall. The only possible pitfall is that this type of investing strategy can lead to concentrating too much on retail-oriented companies, so that you may not have enough diversity to weather certain market changes.
I sure kick myself for not buying that Netflix stock back when it was $7.35…oops.
I like Advanced Micro Devices, manufacturer of PC and server processors, as well as flash memory. AMD’s new Opteron processor series is going to either bankrupt them or set sales records; preliminary indications make the latter seem more likely.
Here are my hot picks… take em or leave em, I make no assurances.
MVIS - Microvision - they make the HUD units in some military gear like the eye pieces in helicopter pilot helmets. The stock is selling at ~7 right now but I like them as a long term investment. The hold more patents on MEMS technlogies (micro-electro mechanical systems) than any other company in the world - which basically means they have a huge research start in the field of micronization. If/when a pair of glasses or contact lenses is released to consumers that has heads up display expect Microvision to get a piece of the action.
NXBTF- Nexia - Small biotech firm trading on the Toronto exchange for 0.70. First company in the world to develop a patentable method for harvesting spider silk which is stronger pound for pound that steel or kevlar. They inserted the spider gene that codes for an essential silk protein into a goat and spin the protein out of the goat’s milk. Brilliant and potentially quite lucrative.
Here’s a highly-speculative one. If they do what they say they can do though, it’s going to be a big winner. Their technology does everything from cure cancer to restore damaged brain cells.
(Disclaimer: I owned it once, made a small profit and then watched it go up from there.)
CRIS - Curis is a therapeutic drug development company…
Oh, if we want to list the one’s we wish we would have bought a few months ago, or the ones we bought then sold then watched them skyrocket, well, I would be spending the rest of my night typing those in
FDC buy now they are going to own 2/3rds of the worlds POS (point of sale) transactions in about 3 months.
They already own Western Union.
Nice post SunTzu2U, but I’m curious about this part:
Can you present a scenario demonstrating this? The only example I can think of is where someone simply doesn’t pay taxes for a while then has to pay loads of penalties and interest, but surely this isn’t what you meant. Thanks.
I don’t have any stocks. I figure that I eat better on 8% but I sleep better on 5%.