Published On: Tue, Mar 6th, 2018

What Should You Know About A Company Before Making An Investment?

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Stock investments need to be profitable and absolutely no gambling should be involved. The only situation in which you should make an investment is when you know that profits are highly likely to appear in the future. Various things are taken into account when an investment is made but what is really important is to know as much as possible about the company.

Analyzing companies is where many investors fail. The general approach is to look at stock values, try to identify some patterns and then make an investment. This approach is flawed because of various reasons. If you want to make good investments, you want to be sure the company is stable and has profit potential. Because of this, you want to use services like and look for information like the following.

CEO Identity

The chief executive officer has to be seen as the company’s most important member, similarly to the captain of a ship. You do not have to look at the biography of the CEO and know everything about him/her. What is important is to analyze business background. Think about whether or not the CEO is experienced and can run the business towards future success.

Everyone knows personalities like Warren Buffett or Steve Jobs. Similarly, there are various aspiring CEOs out there that showcase talent and results on a constant basis. That is what you want to see when you look at who the CEO is for the company you want to invest in.

Analyze Business Model

Business models are vital as they are basically showing you how companies try to maximize profits. As an example, Wal-Mart is known to offer the lowest price they can in order to increase sales. Coach will always sell fewer items of a higher quality but will make a larger profit for every single sale.

Try to find a strategy that aligns with your own personal beliefs. There is no such thing as a right strategy to be used. What counts the most is seeing a business model that is proven to be effective and that can increase growth on the long run.

Potential Competitive Advantage

The competitive advantage is something you want to identify. It means that the company is better than the competition because of superior brand power, products, technology, operating efficiency or patents. The company that you want to invest in should always have some sort of competitive advantage. As an example, the above mentioned Wal-Mart is offering really low product prices. Competitors cannot deal with that. On the other hand, Coca-Cola has huge brand name recognition that stops competitors from taking too much of the market share, even if their products would be superior in terms of what the potential customer wants.

Final Thoughts

The three factors mentioned above should always be analyzed before an investment is made but it is really important to go further with your research. Be sure that you always get as much information as possible about the business, who runs it, how it operates and how profit should be gained in the future.