How To Pick Stocks 101

1. Valuation: P/E ratio tells you whether a stock is “expensive” or “cheap”. Companies with good sentiment and future prospect will have a larger P/E ratio. “Expensive” does not mean the price of the company is a bad deal, however, it means you are paying a premium (extra price) since the rest of the market is also buying the company. On the other hand, “cheap” stocks don't always mean the company is a good deal, the market isn’t buying for a reason. You have to use your own judgment to determine if the premium or discount is worth it.
2. Primary Judgment: Everyone has their own way to determine if the discount or premium is worth it. Dividend Yield, Decreasing Debt Levels, CEO, Sector, recent earnings, Growing Revenue, and much more. Once you have given the company a good look, you can determine whether it is a fair valuation, overpriced, or underpriced. Even if your company is not currently at what you consider a fair valuation, you should come up with a specific price of what is a fair valuation as the company may return to such levels or even become underpriced.
3. Secondary Judgment: Your own judgment is very important, but looking at analysts and hedge fund positions on your company can let you know if your judgment is accurate, again, you have to use your own primary judgment when considering secondary judgment.
4. Portfolio Allocation: Once you have a company you want to buy, you have to consider the allocation you want to give it. The most common method of portfolio allocation is by weighted market cap, meaning the bigger companies will have a larger allocation, while smaller companies will have a smaller allocation. There are many different methods of deciding portfolio allocation and each investor can determine that based on different needs. You might want to consider index funds in you portfolio allocation to diversify and reduce risk, remember simplicity always wins!
5. Personal Taste: As the OP, I generally invest in companies that have a growing sector and growing revenues, high entry barrier, near monopoly status, simple and proven business model, a product I personally use, and a product that helps society rather than burden it.