What Do Traders And Investors Primarily Look For In A Stock?

Every week, Benzinga conducts a survey to collect sentiment on what traders are most excited about, interested in or thinking about as they manage and build their personal portfolios.

This week we posed the following question to over 500 traders and investors as to how they choose a stock:

What do you primarily look for in a stock?

• Story and Personal Use
• Technicals
• Short Float
• Dividends and Earnings

Benzinga readers spoke, and 48% of respondents said they invest based on dividends and earnings.

One way to simplify this approach is to look at a stock’s earnings per share and dividends per share, which communicate their profit per share and the portion of earnings per share that are paid out to shareholders.

For Benzinga readers, the second-highest scoring category was story and personal use, as 24% of investors said they primarily look at this.

Benzinga video producer Mitch Hoch put this approach to use back in November on the Premarket Prep Show, in which he highlighted the sports streaming/gambling story behind FuboTV Inc FUBO, which has more than doubled since then.

For fast and to the point story summaries on stocks, check out the WIIM feature (Why Is It Moving?) in Benzinga Pro. WIIMs are a one-sentence description as to why that stock is moving.

Next was technicals, with 17% of traders saying they primarily look to this when making an investment. Some key technical indicators that many investors follow include Moving Averages (MA), Bollinger Bands, the Relative Strength Index (RSI), and Volume Weighted Average Price (VWAP).

Last was short float, with 11% of traders primarily looking at how many shares of a company are short before placing an order. As the recent r/WallStreetBets inspired short squeezes have demonstrated, a stock that has a high percentage of shorts has the potential to rise in price rapidly in an event known as a short squeeze.

This study was conducted by Benzinga in January 2021 and included the responses of a diverse population of adults 18 or older.

Opting into the survey was completely voluntary, with no incentives offered to potential respondents. The study reflects results from over 500 adults.

Henry Khederian contributed to this report.