Stock Selection Guide Tutorial

Introduction

The Stock Selection Guide is a paper form developed by the not-for-profit National Association of Investors Corporation (NAIC) in the 1950's to aid individual investors in the fundamental analysis and selection of stocks. The relatively-simple two-sided form enables an investor to identify the characteristics of a growth stock, and plot potential future growth from the historical trends. The SSG (as it is known) also helps an investor determine a reasonable value for the stock, suggesting purchase when the stock is temporarily on the cheap side of a value assessment.

The SSG is not, however, a "black box" analysis tool, one that uses mathematical formulas to prognosticate the future. It requires an investor to apply his or her own judgement to many factors in the analytical process. The SSG can be an important aid to the individual investor in discovering those stocks which are most likely to increase in value over the next five years.

The following tutorial attempts to de-mystify the Stock Selection Guide, to explain its components step-by-step, and to point out areas where an investor's judgement should be carefully applied. While this tutorial focuses specifically on the SSG, a special effort has been made to emphasize the tenets of long-term, growth stock selection that any investor may utlize.

The NAIC Web Site has more information about NAIC and the Stock Selection Guide, as well as details about a number of software implementations of the SSG. Blank SSG forms can be ordered from the NAIC Online Store (a pack of 20 forms is $4).