There are two schools of thought on forecasting the future price of a company’s stock: the Fundamental Analysis School, and the Technical Analysis School. Investors who follow the Fundamental School typically have little concern for a stock’s current price. They instead focus on products and profitability. They look for the relative strength and profitability of the company compared to competitors. This style of investing includes people like Warren Buffett (of Berkshire Hathaway) or Peter Lynch (formerly of the Fidelity Magellan Fund).

The technicians, on the other hand, say the historic numbers found in reports made to the Securities & Exchange Commission (SEC) and analyst statements don’t matter -- the only thing that matters is the current price of the stock.

Who is right? Surprizingly, they both are! 

So how can you figure it all out?  Use the "D.A.R.N." Process, Here’s what the acronym D.A.R.N. means:

Direction: The stock’s direction is also known as its trend. The assumption is that a stock will tend to continue in the same direction it is currently heading, so if you look at a historical chart and see that the stock price over time tends to increase, you rate that trend favorably. A downtrend, however, gets a negative rating.

Analysts: What are the analysts saying about a target company? Are they positive, or negative, or even more importantly, how many of them are watching the stock and have their opinions changed over time?

Reports: By looking at the company’s financial reports made to the SEC, you can gauge their financial worthiness. You can also spot key trends and weaknesses.

News: Today’s news is very important to your decision about the future of the company. News has a substantial impact on most companies.

Using this D.A.R.N. approach you should have a better chance of choosing a Darn good stock!