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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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