A "Reality Check" is many things to me as a financial analyst and asset manager. For both of us, there are a couple of rather simple questions to be answered before making a buy, sell or hold decision.
One such question is: what do you believe that can be supported with the raw data and information you are provided regarding the company that is actually true? Another question to ponder is the opposite - what do you believe that cannot be supported with the raw data and information you are provided regarding the company is actually true? Having the correct answer to these questions is difficult to say the least. Incorrect answers to these questions always provide the answer to WHY losses and disappointment are so prevalent in today's stock market.
There is so much (Un-True) information being promulgated by Wall Street, the media and many financial analysts it is necessary for me to spend much of my time asking myself hard questions like these. My answer's to these questions are certainly not perfect, but they go a long way towards helping me present you a positive bottom line each year.
Separating the favorable from the un-favorable companies, it really is not all that hard a task. In all things, some perform this task better than others do.
The stock market as measured by the primary indices as well as my breadth indicators is both mature and over-bought. It is also a bifurcated grouping of stocks - there are a few, very few stocks that are undervalued and could perhaps be purchased at this time. Many / Most are overvalued and should not be considered for purchase.
In my work / analytics, I maintain two lists, one for Bullish Candidates for Buying and one for Bearish Candidates for Short-Selling. On those lists, there is my "best of the best" and the "worst of the worst" to focus on. Therefore, my job becomes quite simple at Bullish or Bearish Inflection Points!