goosmurf's finance page

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Ownership - is the company majority owned by its management?
Management who have no personal interest in the company have much less incentive to manage the company well. They're comfortable taking risks since its not their money to lose, and if those risks pay off they're the first to be congratulated. In addition, in today's culture of job-hopping the downside of failure is simply resignation - there's plenty of other stupid companies out there who'll take you on.

Business - can you understand how the company makes money?
What is/are their primary product(s)?
Too many products may indicate a lack of focus/direction.
Who makes up the bulk of their customer base? Consumers? Businesses?
How does their product compare against their competitors?
Would YOU buy their product? (if you were in the target market)

Simplicity - can you understand their primary sources of income?
Its often difficult to determine the sources of incoming for larger companies. This leaves you open to all sorts of accounting and market craziness. I personally favour smaller companies for this reason - if the company has a few simple products its usually much easier to understand their business - company A sells X widgets for $Y at $P profit.

Risks - what threats does the company face?
Every company faces competitive, regulatory, economic, and other threats.
Know these.
You should be able to figure most of these out even just by browsing and searching the web.

If you can't answer these questions for a particular company then consider investing in another company where you can. There sure as hell ain't any shortage of good investments.


This is in order of utility.

Get Inside

PubMed - public interface to MedLine database. If you're into biotech stocks you should learn to read medical journals - it takes years of research before a product is anywhere near commercialisation and during that time lots of peer review happens. The same "behind the scenes" principle applies to other industries. If you're into tech stocks then find the blogs/forums/mailing lists/whatever that people in the industry use. Most commercial publications are too slow and generally parrot what's already public opinion, or re-write press releases. Yes, <insert your favourite tech publication> is too slow. AFR is too slow. That doesn't mean you shouldn't read them but don't rely on them as your sole source of up to date information - and know that by the time you're reading it the industry folks have already acted.

Companies I hold

Last modified: Fri Feb 12 0:06:43 UTC 2016