What is the best approach to picking good stocks (strong companies) to invest in? Take a second to think about this and how you can apply this to your life. Maybe these ideas could provide a little guidance while you’re implementing you investment plan, for this or next year.
March 11th, 2010 at 10:20 am
When analyzing companies for long term investing, one must consider several pieces of information: the companies financial status over a period of time (income statement, balance sheet, cash flow, historical stock performance i.e. EPS, Beta, P/E, dividend payout), a companies business model and the econmic and market demand, as well as the company’s leadership. Keep in mind diversification such as commodies that hedge against recession regardless of what goes on within the economy. Look at strong fortune 500 companies that have historically done well in the past. Each of these should be considered prior to long term investing.
March 11th, 2010 at 11:44 am
The best approach to picking good stocks to invest in is to review the annual reports, which provide information on recent activity, such as acquisitions, sell-offs, etc. Review historical and current financial data of the company to include a focus on cash-flow. Review the company’s future goals. For example, new products scheduled to be rolled out to the public, such as the I-phone with Apple. And, review EPS, book value, and dividends the company has paid out. This is the approach I would use to pick good stocks to invest in.
March 17th, 2010 at 1:29 pm
The best approach in picking good stocks to invest is to review the company’s cash flow, historical stock performance,P/E and ROE. This approach would help to determine the company’s efficency and the company’s growing
March 17th, 2010 at 2:42 pm
Hello Professor,
There are several approaches that should be used for picking a good company to invest in or work for. The one thing this class has taught me is that you need to look below the surface.
I never knew how important it was to understand what cash flow meant to a company. Having cash to pay the bills is an important item for a company. To keep a business operational, a company need to be able to pay employees, buying new systems, buildings, computer…etc, If you look at a company’s book and they have poor cash flow, I would wonder how they are going to meet these expenses. With that being said, let’s hope that they are not heavily in debt by issuing bonds, or borrowing in the credit markets.
Just looking at the cash flow doesn’t tell the whole picture of how a company is preforming. Look at the company’s return on equity and asset. Having high ratio of total return on assets is a good thing as you are looking at the net income to total assets. Did the company earn enough money for the year to support the assets they have? Also, stockholders expect a return on their investment.
My company just hired a new CFO. This is the third CFO within 3 years. Now I’m very concerned as to what our books are saying, and having the basic understanding how to look at the information, a long with the internal knowledge of working the company. I’ll be able to read between the lines must better.