$10,000 invested into these stocks 10 years ago would be:
- $1,142,000 $NVDA Nvidia
- $345,000 $TSLA Tesla
- $132,000 $AAPL Apple
- $114,000 $META Facebook
- $109,000 $MSFT Microsoft
- $91,000 $UNH United Health
- $90,000 $AMZN Amazon
Here is what to look at when researching a stock:
1) Understand the business model & how they will make money, know:
When evaluating a company as a potential investment opportunity, it’s essential to understand its business model and how it generates revenue. By considering several key factors, investors can gain valuable insights into the company’s strengths, weaknesses, and growth prospects.
What do they do:
Firstly, it’s important to understand what the company does and who its target market is. Consider the problem the company is solving for its customers and how it differentiates itself from competitors in the market. For example, a company may offer a software platform that helps businesses manage their customer relationships more effectively.
Their products:
Next, evaluate the company’s product offerings and any unique features or benefits that set them apart from competitors. Consider the quality, functionality, and relevance of the products to customers’ needs.
How do they make money:
Understand the company’s revenue-generating model. This could be through direct sales, subscription fees, advertising revenue, or other means. Consider the company’s pricing strategy and whether it is competitive in the market.
Why are they important:
Consider why the company’s products or services are important to customers and how they fit into the broader marketplace. What value does the company offer to its customers, and how does it differentiate itself from the competition?
Opportunities/Growth/Catalysts:
Look for opportunities for growth and expansion within the market. Consider any potential catalysts that could drive the company’s growth, such as new product launches, strategic partnerships, or emerging market trends.
MOAT/Strengths/Positives/Advantages:
Evaluate the company’s competitive advantages, also known as their “moat.” This could include things like proprietary technology, strong brand recognition, or exclusive partnerships. Consider the company’s strengths and positive attributes, such as high barriers to entry, a loyal customer base, and a strong balance sheet.
Downside/Negatives/Weaknesses/Threats/Risks:
Finally, it’s important to consider potential downsides to the investment. These could be things like increased competition, regulatory risks, or technological disruptions. Identify any weaknesses or threats facing the company and assess how they may impact its future growth prospects.
By understanding these key factors, investors can make more informed decisions when evaluating a company’s potential as an investment opportunity.
2) Know their peers, competition & competitive landscape:
When evaluating a company as a potential investment opportunity, it’s important to understand its competitive landscape. This includes identifying its peers and competitors, analyzing their strengths and weaknesses, and evaluating how the company stacks up against them.
Is there a MOAT?
One key factor to consider is whether the company has a competitive advantage, or “moat,” that sets it apart from its peers and competitors. This could include things like proprietary technology, strong brand recognition, or exclusive partnerships. By understanding the company’s moat, investors can assess its ability to maintain its position in the market over time.
How do the products compare?
Another important consideration is how the company’s products compare to those of its peers and competitors. Evaluate the quality, functionality, and relevance of the products to customers’ needs. Identify any unique features or benefits that set the company’s products apart from the competition.
How do the financials compare?
Evaluate the company’s financial performance relative to its peers and competitors. Consider metrics such as revenue growth, profit margins, and return on investment. Identify any areas where the company is outperforming or underperforming relative to its peers and competitors.
Strengths & advantages over peers/competitors?
Identify the company’s strengths and advantages over its peers and competitors. These could include things like high barriers to entry, a loyal customer base, or a strong balance sheet. By understanding the company’s strengths, investors can assess its ability to compete effectively in the market.
How does this company stack up against its competitors & peers?
Finally, it’s important to evaluate how the company stacks up against its competitors and peers. Consider factors such as market share, brand recognition, and customer satisfaction. Identify any areas where the company is outperforming or underperforming relative to its competitors and peers.
By considering these key factors, investors can gain valuable insights into a company’s competitive landscape and make more informed investment decisions. Understanding the company’s moat, product offerings, financial performance, strengths, and competitive positioning is essential for evaluating its potential as an investment opportunity.
3) CEO, Management Team & Leadership:
One of the best ways to learn about a company’s leadership is to look into their LinkedIn profiles. This allows you to see their professional background, connections, and endorsements. You can also gain insight into their leadership style by reading their posts and updates on the platform.
Another important step in evaluating a CEO is to Google them and see what information comes up. If the CEO has a low or bad rating, this could be a red flag and may warrant further investigation.
Glassdoor and Indeed are also valuable resources for learning about a company’s management team. These platforms allow employees to leave anonymous reviews about their experience working at the company, including their opinions on the leadership.
Finally, it’s crucial to review the 10-K annual report for the bios of executive management. This document provides a comprehensive overview of the company’s financial performance, strategy, and executive bios. It’s an excellent resource for learning about the leadership team’s experience and qualifications.
By following these steps, you can gather valuable insights into a company’s CEO, management team, and leadership and make informed decisions about whether to invest in or work for the company.
4) Future Growth Potential:
The first step in evaluating a company’s future growth potential is to assess whether the company can scale. This means determining whether the company has the capacity to grow and expand its operations over time, either through increasing revenue or expanding into new markets.
One way to gauge a company’s growth potential is by looking at past growth trends in financials. This data provides valuable insights into how the company has performed historically and can help predict future growth potential. It’s essential to look at revenue growth, margins, and profitability to get a complete picture of the company’s financial health.
To assess future growth potential, it’s also crucial to understand the company’s products and the changing landscape of the market. Knowing about new products or changes in the market can help you understand how the company plans to stay competitive and grow in the future.
Recent news, 10Qs, 10Ks, investor presentations, and statements are excellent resources for learning about a company’s future growth potential. These documents often contain valuable information about the company’s strategy, goals, and plans for expansion. It’s essential to review these materials carefully and analyze them in the context of the broader industry landscape.
By following these steps, you can gain valuable insights into a company’s future growth potential and make informed investment decisions. Understanding a company’s ability to scale, past growth trends, product landscape, and future plans can help you identify promising investment opportunities and avoid potential risks.
5) Financial health:
One of the key indicators of a company’s financial health is positive cash flows from operations. This means that the company is generating cash through its core business activities and can sustain its operations without relying on external financing.
Another important metric to consider is the quick ratio. A quick ratio of greater than 2 indicates that the company has enough liquid assets to cover its short-term liabilities and can sustain its operations in the event of a financial shock.
It’s also essential to review a company’s investing and financing cash flows to ensure that it’s making prudent investments and managing debt effectively. Healthy investing and financing cash flows can indicate that the company is using its resources effectively to grow its business while maintaining a healthy balance sheet.
A growing balance sheet and income statement are other critical indicators of a company’s financial health. Companies with strong financial health should see growth in revenue, net income, EPS, and profit margins over time. These metrics demonstrate that the company is generating more revenue and earnings and is efficient in managing its costs.
By evaluating a company’s financial health using these metrics, you can gain valuable insights into its overall financial strength and make informed investment decisions. It’s essential to review these metrics regularly and compare them to industry benchmarks to understand how the company stacks up against its competitors.
6) Earnings & revenue history. Look at financials and projections:
Firstly, one must look at the company’s financials and projections to determine if there has been growth. This can be done by examining the company’s revenue and net income over a period of time, such as the past year or quarter. If the company’s revenue and net income have increased over this period, then there has been growth.
Secondly, it is important to assess whether there is growth potential for the company. This can be determined by looking at factors such as market trends, consumer demand, and industry competition. If there are opportunities for expansion or innovation within the company’s industry, then there may be significant growth potential.
Thirdly, one should examine whether the company has consistently beaten or missed earnings expectations. This can be an indicator of the company’s performance and management effectiveness. If the company has consistently beaten earnings expectations, it may indicate strong financial management and strategic decision-making. On the other hand, consistently missing earnings expectations may suggest underlying issues with the company’s operations or strategy.
Lastly, it is important to consider whether earnings have remained flat or grown consistently. Flat earnings may suggest that the company is experiencing stagnation or facing challenges in achieving growth. Conversely, consistent growth in earnings may indicate a healthy and successful business.
Overall, assessing a company’s earnings and revenue history requires a holistic approach that takes into account both quantitative and qualitative factors. By considering these key metrics, investors and analysts can gain a better understanding of a company’s financial health and growth potential.
7) Valuations
One important metric to consider is the r/E ratio, which measures a company’s price-to-earnings ratio relative to its expected earnings growth rate. A high r/E ratio may indicate that a company is overvalued, while a low ratio may suggest undervaluation.
Another useful metric is the PEG ratio, which takes into account both a company’s price-to-earnings ratio and expected earnings growth rate. A PEG ratio below 1 may indicate that a company is undervalued, while a ratio above 1 may suggest overvaluation.
The P/S ratio, or price-to-sales ratio, can also be helpful in determining whether a company is overvalued or undervalued. This ratio compares a company’s market cap to its annual revenue, with a lower ratio indicating undervaluation and a higher ratio suggesting overvaluation.
Finally, the P/CF ratio, or price-to-cash flow ratio, can provide additional insights into a company’s valuation. This ratio compares a company’s market cap to its cash flow from operations, with a lower ratio indicating undervaluation and a higher ratio suggesting overvaluation.
In addition to these metrics, it is important to compare a company’s valuations to those of its peers and competitors within the same industry. By analyzing how a company’s valuations stack up against others in the industry, investors can gain a better understanding of whether the company is overvalued or undervalued compared to its peers.
Overall, valuations require a thorough analysis of multiple factors to determine whether a company is overvalued or undervalued. By incorporating these key metrics and comparing a company’s valuations to those of its peers, investors can make more informed investment decisions.
8) Institutional Sponsorship:
One key factor to consider is whether big banks and hedge funds are buying or holding the company’s stock. This can provide insights into the market sentiment surrounding the company and whether institutional investors view it as a promising investment opportunity. If big banks and hedge funds are buying the stock, it may indicate that they see potential for growth.
Another important metric to look at is the percentage of the company’s stock that is held by institutions. Companies with a higher percentage of institutional ownership may be viewed as more stable and reliable investments, as these institutional investors tend to have longer-term investment horizons.
It is also important to track whether Wall Street institutions are increasing or decreasing their positions in the company. If institutions are increasing their positions, it may indicate that they are optimistic about the company’s future prospects. Conversely, if institutions are decreasing their positions, it may suggest that they have become less confident in the company’s ability to perform well in the short or long term.
Overall, evaluating institutional sponsorship can provide valuable insights into the market sentiment surrounding a company and its stock. By considering factors such as buying or holding patterns, percentage of institutional ownership, and changes in institutional positions, investors can gain a better understanding of the company’s potential for growth and stability.
9) Insider Trading:
When evaluating insider trading activity for a given company, it is important to consider several factors. Firstly, one should look at whether the CEO is buying or selling shares. If the CEO is buying shares, it may indicate that they are optimistic about the company’s future prospects. Conversely, if the CEO is selling shares, it may suggest that they believe the stock is overvalued or that they have concerns about the company’s performance.
Secondly, it is important to track whether management as a whole is buying or selling shares. If multiple members of management are buying shares, it may suggest that the company is performing well and has promising growth potential. Conversely, if multiple members of management are selling shares, it may indicate that they are concerned about the company’s future prospects.
Overall, evaluating insider trading activity can provide valuable insights into the market sentiment surrounding a company and its stock. By considering factors such as CEO and management buying or selling patterns, investors can gain a better understanding of the company’s potential for growth and stability. However, it is important to remember that insider trading can be heavily regulated and subject to legal restrictions, so investors should always consult with their financial advisor before making any investment decisions based on insider trading activity.
10) Recent News. Google the company and look at recent articles:
Firstly, it is important to analyze what bloggers and other online commentators are saying about the company. Bloggers can provide valuable insights into market trends and sentiment towards a particular company. By analyzing bloggers’ opinions and perspectives, investors can gain a better understanding of how the market views the company’s future prospects.
Secondly, one should assess whether recent news for the company is good or bad. Positive news such as new product launches, strategic partnerships, or revenue growth can lead to increased investor confidence and drive up stock prices. Conversely, negative news such as missed earnings projections, scandals, or lawsuits can have the opposite effect and lead to decreased investor confidence and declining stock prices.
Thirdly, it is important to look at what news outlets and media sources are saying about the company. Major news outlets tend to have more resources and access to information than individual bloggers, so their reporting can provide valuable insights into a company’s performance and prospects.
Fourthly, analyzing social media commentary can also be helpful in understanding market sentiment towards a company. Social media platforms such as Twitter and Reddit can provide real-time insights into how investors and consumers feel about a particular company or industry.
Finally, it is important to identify reasons for recent movements in the company’s stock price. This can involve analyzing recent news, financial reports, and other market trends that may be affecting the company’s performance.
Overall, analyzing recent news is an important part of evaluating a company’s stock. By considering what bloggers, news outlets, and social media users are saying, investors can gain valuable insights into market sentiment towards a company and make more informed investment decisions.
For new investors
Investing in the S&P 500 Index Fund can be a smart decision for those looking to build a diversified portfolio. Rather than trying to pick individual stocks, which can be time-consuming and involve significant risk, investing in the S&P 500 provides exposure to 500 of the largest and most successful companies in the United States. This approach is simple and low-cost, making it accessible for investors of all levels of experience.
Historically, the S&P 500 has delivered strong returns, with an average annual return of around 11%. For example, if an investor had invested $100,000 into the S&P 500 over the last several years, they could potentially have seen significant growth in their portfolio. Furthermore, because the S&P 500 includes a diverse range of companies across different sectors, investing in this index also helps to minimize the risks associated with investing in a single stock or sector.
• 30 Years = $1.6 Million• 20 Years = $660,000• 15 Years = $390,000• 10 Years = $300,000• 5 Years = $168,000• 3 Years = $150,000
Compound growth + long-term investing = one of the best tools in wealth creation!
Overall, buying and holding an S&P 500 Index Fund is a great way to achieve long-term investment success. It provides investors with exposure to some of the most successful companies in the U.S., while also minimizing risk and maximizing returns. With its historical track record of strong performance, the S&P 500 is a reliable option for those looking to grow their wealth over time.
