Spot the Most Promising Companies This Way

It's easy to be overwhelmed by financial news. We see stocks rise and fall and read reports explaining the moves, but some bits of news are much more significant than others.

Consider MasterCard (NYSE: MA). It recently announced a billion-dollar stock buyback and that it expects earnings to grow at about 20% per year. That's good news for those worried about the company's future, considering potential reforms that could put a crimp in profits.

But really, this isn't huge news. Companies can manage their earnings to some degree, offering low-ball projections and then upping or beating them. And a projection is still just an estimate, not an accomplishment. Buybacks, meanwhile, can benefit shareholders, but they don't power future growth.

There's a better reason to be bullish on MasterCard, though. The company recently reported that it expects China to oust the U.S. as the world's top credit card market in just 10 years. The number of cards in China has quadrupled since 2006, and may surpass a billion by 2025. Meanwhile, with the middle class growing, more dollars will be charged on each card. Still, even the China growth isn't a certain win for the company, as a Chinese competitor, China UnionPay, currently has a payment-processing monopoly, which Visa (NYSE: V) and others are fighting.

Seek significant news
Every day, though, people react to news that isn't very meaningful in the long run. Oracle (Nasdaq: ORCL), for instance, recently reported quarterly earnings that beat analysts' expectations. Well, those expectations are largely based on management guidance to begin with.

More meaningful are the details in the report, such as revenue being up a whopping 50% over last year. Its revenue has been rising steadily for many years, but with some other companies reporting big gains, you might need to remember that they're recovering from recession-related low numbers in recent years. Some are also pleased by Oracle's capture of former Hewlett-Packard (NYSE: HPQ) CEO Mark Hurd, as he may help Oracle with its growing hardware business while hurting competitor HP.

Similarly, Texas Instruments (NYSE: TXN) announced a $7.5 billion share-repurchase plan and an 8% dividend increase. Some may focus more on the share buyback, but they should look at the dividend, instead. The share buyback is a one-time event, but barring unforeseen severe difficulties, the dividend is likely to keep getting paid every year -- and to keep growing, too. The increase boosts the yield to more than 2%. (Click here to read why Texas Instruments is today's "11 O'Clock Stock" buy opportunity.)

When you review financial news, stop and consider which items are more meaningful than others. That can help you find the most promising and powerful companies for your portfolio.

When you run across exciting investments, you can research and keep up with them easily by adding them to our new feature, My Watchlist.