Investing in stocks using online IBD

RIVER BENDER - November,  2009

For years I selected stocks to invest in by using stock indexes available in the Investors Business Daily (IBD) newspaper. I never subscribed because I could purchase the paper at a local convenience store only when I needed it. But after moving to River Bend from Maryland, the only place IBD was available was at a broker in New Bern who would let me have a back issue. Now, unfortunately, the broker no longer subscribes to IBD. Then a friend in RB told me about IBD online.

IBD Online

The purpose of this article is to inform investors that some of the IBD information is now available online and free. In particular, the Earnings Per Share (EPS) index is available which is probably the most important indicator of whether a company is doing well or not. A rating of 95 tells you that a company's earnings outperformed 95% of all other publicly traded companies. As William O’Neil, Chairman and Founder of Investor’s Business Daily, once said "There is absolutely no reason for a stock to go anywhere if current earnings are poor." You can access IBD at http://www.investors.com/StockResearch/IBDIndexes.aspx

EPS Index

Investor's Business Daily rates stocks on a 1 to 99 scale (with 99 being best) comparing a company's earnings per share growth on both a current and annual basis with all other publicly traded companies in the database. Stocks with EPS Ratings of 80 or more have outperformed 80% of all publicly traded companies in earnings. The EPS rating combines each company's most recent two quarters of earnings-per-share growth with its three to five-year annual growth rate. Although the EPS rating is not fool-proof research has shown that earnings growth is the No. 1 indicator of a stock's potential to make big gains. If you want to see other important indexes, such as relative price strength of a stock you'll have to get the newspaper or subscribe and pay for online access at $28.95/month.

Selecting a stock

It is not the intent here to suggest how to initially pick a stock. Google "stock investing" or similar key words for lots of information on how to initially select companies to invest in, depending on whether you're looking for such things as income or growth. If you had the IBD paper an alternative would be to scan down the indexes and look for companies with EPS ratings of perhaps 90 or better. Not having the paper, all you can do online is look up one company at a time. For example: Let's say you decide to invest in a computer company like Hewlett Packard. Go online to the IBD website shown above and enter the name in the block where it says "Enter symbol/keyword." Lots of data including a price graph will be displayed but scroll down and you'll see the current EPS index, which is 91as of this date. This means its earnings outperformed 91% of all companies on the exchange and is probably a good investment. But look to the right and you'll see that Apple is the leader in the computer category. Clicking on AAPL will show their EPS rating at 95, but the price per share was $181 compared to $46 for Hewlett Packard.

At times the online IBD is a bit flakey. Sometimes it doesn't display a certain company and I'm not sure if it's by design or not. I registered to see if it made a difference but it didn't so I'm guessing that they just want everybody to try the free trial.