Non-Financial Things To Consider Before Choosing A Stock

Investing in a company is deciding that you want to be a part of it. It is tying yourself to a business for a lengthy period of your life and soon, you’ll know the business like it’s your family.

What this means is that asides from the potential money to be made, you’re going to be a part of all the things they are known for. As such, here are some things you should have an eye for.

Your Understanding Of It

Your understanding of a company is enough to either help you win in the investing game or lose completely. You need to know the purpose of the company, their objectives, their downtimes, how they make their money, their vision and so on.

Knowing more about the company will have you making money from an experienced and broad perspective. This is also what we call investing within your circle of competence.

The Management

You might invest your money alright but if the right people are not there to deploy it and put to good use, then you’re dancing ok very thin ice. Do you think the guys who have been put in charge are competent enough to ensure the business yields returns?

What kind of culture has the management created within the organization? How well do they manage their Human Resources? If a scandal of some sort is brought to the fore, can these managers handle it or are they the kinds that will run away?

Are they innovative and following the trends as the world is moving or are they stuck in old systems? Carry out a full management assessment with details of who is who before you sign up to invest. It just might save you from a mistake.

Make Sure It Has An Economic Moat

An economic moat, as used by warren buffet is a term that signifies what makes any company stand out. It is what gives it its competitive advantage and what will weather the storm when the storm does come.

It means that if the company you want to invest in makes shoes and a ton of other companies do the same, there is something they have that still gives them an edge. It could be access to more affordable raw materials than the competition.

It could also be the goodwill they have garnered through CSR. This shows you why the company you have chosen is special and ultimately helps build your confidence in it.

It’s Strength In The Industry

Determining the strength of a company in the industry it plays in doesn’t mean you invest in only the big companies with large market shares. In fact, if you’re a growth-oriented investor as all of us should be, you are better off being with a company with a not so big industry share so as to give room for growth!

Review its growth over the years as well as its strategies to own a larger market share. This will help you manage your expectations with the company and make good investment decisions.

Written by Lawretta Egba.