With the market having swooned as deeply as it has, there seem to be too many bargains. I'm having trouble deciding which stocks to buy.
If that's your problem, too, here are some solutions. The first is making sure to do plenty of research. It's easy to compile a list of compelling companies, but it takes work to dig into each of them. Do so and you may find that some have high profit margins, suggesting that they wield more pricing power than other companies. (Higher margins can also lead to higher profits -- though not always.) You may find that some companies are carrying a lot of debt. That could be a disqualifier, because that debt will require repayment, and will limit the companies' flexibility, especially in a shaky market.
(Hop over to the completely free Motley Fool CAPS investing community to access a bunch of information on 5,400 stocks and to read what your fellow Foolish investors are saying about them.)
Here's another thing to look at: insider trading. And no, I don't mean what Martha Stewart in the past and Mark Cuban in the present were accused of. I just mean the publicly recorded purchases and sales of stock by company bigwigs.
For example, I noticed that Cisco Systems (Nasdaq: CSCO) insiders have been largely selling over the past year. That's not too encouraging. To be fair, insider sales aren't as meaningful as buys -- because an executive might be reluctantly selling in order to buy a home, pay for college, or what have you. But they pretty much buy only because they think the price will go up. Still, seeing hardly any purchases at all is a little unsettling.
On the other hand, some company insiders are buying. Here's a short list of some recent buys:
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Stock
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Insider Buying, Last 30 Days
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Burlington Northern Santa Fe (NYSE: BNI)
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$65.7 million
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H&R Block (NYSE: HRB)
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$50.1 million
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Systemax (NYSE: SYX)
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$173.5 million
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Calpine (NYSE: CPN)
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$65.6 million
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Source: MSN.com.
Upon closer inspection, I note that most of H&R Block's many insider purchases over the past year were all by one director. I'd rather see a bunch of different insiders buying. When I looked up Caterpillar (NYSE: CAT), I saw a bunch of different insiders, but they were selling. Perhaps I'll hold off on that stock for a while.
This can be a good way to check up on your current holdings, too. For eBay (Nasdaq: EBAY), I found departing CEO Meg Whitman doing a lot of selling, but the CFO spent a quarter of a million dollars buying in the summer. That's encouraging.
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