We told people in the investment field what we were doing. Many (from investment gurus to stock brokers to financial planners) offerred to speak to our group. We invited them to our meetings. We learned about the P/E (price to earnings). A stock is overvalued when the ratio becomes too high. 10 to 15 is a good ratio but only one of several factors to consider when buying a stock. A company's revenues and net earnings, its CASH FLOW ( a big consideration), its debt should all be examined. Has its financial status improved over the last few years? This information should be available in the companies annual statements, its balance sheet. The nature of the business is important. Horse-drawn carriages are probably not a big seller.
We began to follow the business section of the newspaper. Some journalists have a good business sense for recommending winning stocks. It takes awhile to figure out who those journalists are!
The internet was a great source of information. We could go to a companies website and find all sorts of information. There are other sites where we could check out a stock.
Tomorrow, I will tell you about our first investment.
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