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Trader Q&A: How Can I Find Good Long-term Stocks?

Our panel of trading specialists discusses what factors to consider and how Schwab Equity Ratings can help.

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[Lou] Armando from North Carolina: "When looking for long-term stocks what is a good indicator of steady and regular appreciation?"

[Randy] So as you may know Schwab has rated—we rate around—I think it's 3,000 stocks and we give them an A, B, C, D, F rating which is a grading system that I think everybody's familiar with because we've all been using it since we were in first grade. But we have a relatively, very sophisticated, algorithm that is run every Saturday. It looks at all the stocks out there that it rates and they are—those ratings can adjust, or increase or decrease from an A to a B or a B to an A or whatever on a weekly basis.

So all of the factors that this long-term research has been looking at for a very long time are built into this model. So if you're looking for a stock with long-term appreciation capabilities the Schwab equity rating system is designed for a six to twelve-month time horizon. So for most people these days six to twelve months is long-term because a lot of people's time horizons have gotten a little bit shorter. So that's one of the things I would mention. If you want to talk about specifics Kevin you can jump in there. But I would say that's an easy way to do it.

[Kevin] I completely agree with Randy. I find that using the equity ratings is a great starting spot to build a portfolio, or rather not a portfolio but a list of securities to consider for your further investment down the road. I would then take an approach that involves the use of charts to help me pinpoint my when to jump into those particular stocks. So I like the idea of utilizing a long-term investment strategy through something like the equity ratings to locate securities and then utilizing charts to determine just when I should be stepping into those positions, when it's primed to be an appropriate opportunity for me.

[Lou] And if you're not a Schwab client just remember that Schwab equity ratings are unbiased; we don't make a market in securities; we don't try to get you to buy As and Bs over Ds and Fs. We're trying to give you a disciplined way to pick stocks looking a fundamentals, valuation, momentum and risk.

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