Investing Wisely: Know a Company Before You Invest

Investing in a business requires thorough research and a clear understanding of your objectives. If you’re trading stocks for the short term, technical analysis, backdating, and indicators are your primary focus. However, if you’re investing in a business for the long term, here’s a detailed guide to help you narrow down your options.

Personal Responsibility

When investing in a company, it’s essential to align your investments with your values. For instance, I once owned a tobacco stock that was profitable but conflicted with my personal beliefs. Ultimately, I sold it because I didn’t want to support something I fundamentally disagreed with. Remember, when you buy a stock, you’re investing in that business and contributing to its growth. If you don’t want more of what that company represents in the world, why invest in it? With over 4,000 companies to choose from, you can afford to be selective.

Investing in Long-Term Prospects

Once you have a list of potential stocks from screeners, recommendations, blogs, or other trusted sources, make sure your objective is clear. Is this a trading opportunity or a long-term investment? For long-term investments, ensure the company is large enough to withstand adverse events and won’t go bankrupt due to a few bad news cycles. Look at its market cap; I prefer companies with a market cap of at least 100 million. Consider the company’s reputation, long-term viability, product demand, and competition. Ask yourself if the company is iconic and if its products or services will be in demand in the long term.

Upper Management and Insider Trading

After narrowing down your list, investigate the company’s leadership. Who is the CEO? What are their beliefs and goals? Are they passionate about growing the company, or are they just collecting a paycheck? Insider trading can provide valuable insights. Check if upper management owns shares in the company, and if so, at what price they bought and sold them. Websites like Nasdaq and GuruFocus can help you find this information. Ensure the leadership is honest, ethical, and capable of growing the company.

Conclusion

By following these steps, you can screen out unwanted stocks and focus on companies that align with your values and investment goals. Use the resources and websites mentioned to cut down your research time and make informed decisions. Remember, don’t just pick the top stocks mentioned on sites without doing further research or creating your own strategic plan first.

Happy investing! If you have any questions or need further assistance, feel free to ask.