Take me through your criteria before you invest in a company.?

Question

Take me through your criteria before you invest in a company.?

Answer 1

The short of it is:

(1) do they make money (or are they about to in a substantial way)?

(2) what do they do they do better than the competition (and if the competition is so much better drop this one and look at them instead)

(3) check the SEC reports (if they just talk about inconsequential things or the top brass playing musical chairs, then forget them and move on)

(4) look at what everyone else is saying about them (news reports, features)

(5) check out their ratings with whatever agencies are available (I get a couple from my broker and a few others I check out more directly, but that will cost you extra), so if I think they are great, or potentially great, but their ratings stink, then put them on back burner.

A company can have really good financials and a super product mix and public reputation, but if the market and market makers aren't interested, then you have to make some estimates of future value (sales and earnings growth, acquisitions, etc. come in here). Is it worth holding on to, or should you simply come back later?  For shorter term interests, you have to check the charts, if it isn't trending up or possessing some indication of a change of direction, then you will have to wait (or be prepared for paper losses before the gains come and of course if you sell out before then the losses become very real).

All the arithmetic and careful checking is mostly to support you when some other thing, like a war, disaster, or financial or political crisis comes and derails things, then you don't feel so stupid. The market often takes the above in consideration, so you are going with the rational flow, but the market is incredibly fickle and capricious, so whether you set a stop loss, always have a number that tells you, I will suffer this much and no more when the market is against you. (Move the number up when the value rises.) Finally, if things are going well, don't get greedy.

Answer 2

Too many steps.

1. Know the company, in and out.

-what have they done?

-what has the operators done?

2. Risk

What are you willing to risk?

3. Failure

What are you willing to lose?

4. Turnaround

What are signs you'll invest more, or pull out?

Answer 3

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