A few quick pointers when choosing a stock that everyone should think about. It's quick, it's simple, and the best part is that is works:
* Trailing P/E or forward P/E: what's the best way to value a company? Well I don't want everyone punching in their numbers into their cash-flow models (...yet). Think P/E ratios! Formulized as the price of a stock over its EPS; the higher the P/E, the more expensive the stock, and the opposite for the lower the P/E. This information is everywhere, and you just have to compare it with the industry and other competitors. This information is everywhere. The question is whether to use the trailing P/E (based on historical information) or forward P/E (based on forecasted information). Interestingly enough, it doesn't matter over the long haul: Looking back over the past 20 years, on average the lowest trailing P/Es showed equivalent performance against a portfolio with the lowest forward P/Es. But imperically in a bull market, low forward P/Es outperformed low trailing P/Es, on average by 1.2%. By contrast, in years when the market fell, the trailing P/E outperformed the forward P/E by 2.5%.
* Comment on related stocks/ETFs: Another takeaway here is to watch out for lowered analyst forward estimates during bear markets. Most tend to be skewed to the conservative end, an inefficiency that one could capitalize on. So in cases like this, rely on trailing!