Thursday, May 23, 2013

Creativity in Company Research

Common Stocks and Uncommon Profits by Philip A. Fisher
Philip Fisher, one of the pioneers of modern investment theory, identified fifteen points to look for in a common stock. The list begins with: Does the company have products or services with sufficient market potential to make possible a sizable increase in sales for at least several years?

That is a powerful question.  But how do you find the answer?  Imagine yourself as a new salesperson preparing to represent the company's products in a competitive market place.

One of the best places to begin is the company's website. Most sites have an "About Us" page which provides a brief history and stresses the core values of the organization. The product pages are usually categorized by market segments and teach the main features and benefits of the company's offering. The product pages are also a great way to learn the terminology and technology used in the company's offering.

Wikipedia is a good source of historical and technical information. Check out the entries on the company, the company founders and the technologies they developed. While the Wikipedia entries themselves are usually well organized and thoroughly hyperlinked, the references and external links at the bottom of each entry often lead to even more detailed and interesting articles.

Reading the company's most recent annual report is essential. In the annual report, the company officers share their point of view about the market they serve, trends in the marketplace, competitive strengths, and strategic plans for continuing growth. The annual report also contains the recent financial results which allow you to judge the success of the company's past decisions and if the company has the resources to implement the plans it has outlined.

After completing the research above, you would be ready to make your first sales presentation if yours were the only company in the industry. The next step is to identify each of the company's primary competitors and do a similar analysis on them. Review their web pages, read their product literature, learn their history of success and failure. Make sure you understand why your company and your products are better.

When you feel you understand the company well enough to make a sales presentation, you are in a good position to determine the quality of the investment.  If you believe you could close the sale, the investment is worthy of consideration.

How do you analyze investment opportunities?

You might also like:

Stages of Investment
The Thrill of Ownership
Looking Forward

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