Warnings aside, the first thing to consider is risk. How much debt does the company have? Are they earning money, and will they continue earning money. Read their annual report, and look at their business, and think about what could happen that could hurt their business. Risky stocks may be a good investment, but you should always be aware of the risks beforehand, and decide what you are going to do if the worst comes to pass.

After taking a hard look at the risks, you also have to look at the potential for the company, and the likelihood that it will happen. For example a solar cell company, may have huge potential if the government mandated solar cells on top of every building, but that is very unlikely to happen.

Look at the current price/earnings(P/E) ratio and what it would be in the future with various levels of growth. Also, look and see if the company pays dividends. Often, the earning number is inflated through accounting tricks, but the dividend is what the company paid stockholders last year. If the company has a good dividend, you can make a bit every year while continuing to hold the stock.

While the fundamentals, and how much money the company makes will affect it over the long term, other factors often dominate the markets in the short term. During the late 90's tech stocks got bid up, because they were hyped up in the media. After September 11, investors worried about terrorism, and stocks were priced accordingly. The market has day-to-day fluctuations, but usually there are certain themes from the media that hype something, that over-values or under-values certain segments of the market. However, when the theme goes away--often rather quickly--those stocks will correct. One short-term strategy would be to try to ride the themes, and profit, but it can at times be quite difficult, and mistakes often result in heavy losses. If you are going to buy a stock that you think will go up on hype use extreme caution. A more sensible approach is to try to buy things that are fundamentally undervalued before you think a cycle will start hyping that particular area of the market.