10 Questions You Must Ask Before Buying Any Stock
1.
Are the company's sales and profits growing every year for at least 10 years? Is it growing in relation to its competition as well as its own sales and profit numbers? 2.
Does the company pay dividends and does it have an unbroken dividend record? Is the dividend growing? It is always difficult to fake cash.
The first indication of trouble is also lower cash flow.
3.
What is the position of the company in its industry? This determines longevity of the company.
Strength usually comes out of size.
4.
Are the operations of the company restricted to a specific area or is it geographically diversified? 5.
Is the company vulnerable to business cycle changes? Or is the company selling products that the consumer requires despite changes in the business cycle? 6.
Is the company in an industry that is constrained by government regulation? Is the company constrained by a single supplier? 7.
Is the company positioned to grow with secular trends? For instance , low environmental impact products, green attitudes etc is a growing trend.
Any industry that supports this trend will grow in the medium and long term? 8.
Do the officers hold a substantial amount of stock? Their fortunes are linked to your fortunes.
9.
Is the balance sheet attractive in terms of debt equity ratio and year over year cash flow growth? 10.
Is the stock reasonably valued with respect to its peers and the industry? Always try to buy a stock that is relatively undervalued.
Last, but not the least as Warren Buffet says, is it simple to understand? Compare a consumer products company such as Wal Mart and a bio tech company.
It is probably easier for the common man to understand Wal Mart.
Always ask these questions.
You can also rank different investment options on a grid when you answer these questions.
Understand investments when you put in your hard earned money in it.
Many times we are tempted to forgo research and we depend on arm chair advice from others.
This advice may not be appropriate.
When you buy a stock that is widely followed, you may see short term growth, but when interest in the stock wanes, the prices may drop.
These are ten things one must look into while making any stock purchase.
Are the company's sales and profits growing every year for at least 10 years? Is it growing in relation to its competition as well as its own sales and profit numbers? 2.
Does the company pay dividends and does it have an unbroken dividend record? Is the dividend growing? It is always difficult to fake cash.
The first indication of trouble is also lower cash flow.
3.
What is the position of the company in its industry? This determines longevity of the company.
Strength usually comes out of size.
4.
Are the operations of the company restricted to a specific area or is it geographically diversified? 5.
Is the company vulnerable to business cycle changes? Or is the company selling products that the consumer requires despite changes in the business cycle? 6.
Is the company in an industry that is constrained by government regulation? Is the company constrained by a single supplier? 7.
Is the company positioned to grow with secular trends? For instance , low environmental impact products, green attitudes etc is a growing trend.
Any industry that supports this trend will grow in the medium and long term? 8.
Do the officers hold a substantial amount of stock? Their fortunes are linked to your fortunes.
9.
Is the balance sheet attractive in terms of debt equity ratio and year over year cash flow growth? 10.
Is the stock reasonably valued with respect to its peers and the industry? Always try to buy a stock that is relatively undervalued.
Last, but not the least as Warren Buffet says, is it simple to understand? Compare a consumer products company such as Wal Mart and a bio tech company.
It is probably easier for the common man to understand Wal Mart.
Always ask these questions.
You can also rank different investment options on a grid when you answer these questions.
Understand investments when you put in your hard earned money in it.
Many times we are tempted to forgo research and we depend on arm chair advice from others.
This advice may not be appropriate.
When you buy a stock that is widely followed, you may see short term growth, but when interest in the stock wanes, the prices may drop.
These are ten things one must look into while making any stock purchase.
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