Saturday, April 4, 2020
#1 in market research

Finding your competitive edge when looking for a stock

We strongly believe in due diligence, but real success only comes when you have an edge. Everyone has their own…

By editor , in The Public Markets , at May 14, 2018

We strongly believe in due diligence, but real success only comes when you have an edge. Everyone has their own unique interests and passions so the real trick is to harness that and use it to your advantage. If you are a tech nerd, invest in tech. If you are a car lover, invest in cars. It’s more than likely that you will be able to see things that even the big hedge funds aren’t catching on to.

The trick to buying an undervalued stock would be to completely research the company and not simply purchase a stock because some of its ratios look good or because its price has recently fallen. It isn’t quite that easy to tell whether a stock is a good purchase. Implementing your common sense and your critical thinking abilities to stock selection is indispensable. To raise your chances of winning, it is smart to purchase companies that you know. Warren Buffett takes this approach. Firms that you know will more than likely be in businesses you’ve worked in or who sell consumer products which you’re familiar with.

In case you have worked for a biotech firm for many years, you probably have a better than average understanding of the biotechnology business. And if you purchase basic things like vehicles, garments, appliances and meals, you know a thing or two about customer products. Another strategy which smart investors favor is to purchase companies whose goods or solutions were in demand for quite a long time and therefore are likely to continue to be in demand. Looking at stock quotes will not tell you what companies these really are, you’ll need to do some critical thinking. It is not always possible to forecast when innovation will create even a longstanding product or become obsolete, but we may discover how long a company has been in business and research how it’s adapted to change over time. At this time, it could be worthwhile to examine the organization’s direction as well as the effectiveness of its corporate governance in ascertain how a company reacts to changing business environment. One good example would be a firm with a history of growing in the face of change. You may find something like that to be a good bet. In conclusion, stick to what you know and you’ll be surprised of what you are actually capable of discovering.