Well Integrated in the Community – Check out the products and services that are used by you and people around you. For example, the phone network provider, clothes you use, companies constructing the buildings in your city, banks providing services for you, people around you and in your company etc. If the product or service is omnipresent, then it is a good stock to consider as it could mean they have great demand. If they are providing products and services everywhere it could mean their logistics are in place, inventory management is efficient and prices are competitive which are features of a well managed company.
Evaluate Competition – When you look at a company to invest, check out how unique its product or service is. If there are too many players in that segment, the company will face stiff competition and may or may not sustain in the long run. If there are many innovations by companies and start-ups in the segment, it means the company has to constantly keep doing something different which is not easy. Such a segment calls for more research and analysis.
If the product or service is unique, there is a better chance for the company to grow. For example, once upon a time, HMT was synonymous with watches in India and it would have been considered a solid stock. If people are loyal to the company’s products, there will be fewer fluctuations in the company’s growth story and thus the company will be more stable.
Leadership and Management – Look at the leadership of the company and the core management team. Read up on them and their interviews. Their views, credentials and experience will help you understand if the company will sustain in the long run.
You can simultaneously read up on investing, current market conditions, read research reports on the companies that you have selected, understand and analyse the balance sheet and various financial ratios to finally make the ‘buy’ decision.
Did you consider these factors or any other factors before investing in shares?
Reading – If you like to study more about Direct Equity investing then we recommend you read “One up on the Wall Street” by Peter Lynch and “The Essays of Warren Buffett : Lessons for Corporate America” by Lawrence Cunningham.
This article was originally published on Finalaya.com