I am very proud— as you should be too— of how we’ve been dabbling into more advanced investing topics on The Money Minute. In future premium articles, I’ll be decoding more metrics that you’ll see on stock tables or SEC filings.
But, there are some variables that are very important to a company’s value that you won’t find projected on any trading computers at the stock exchange. Here are three things that I check out before making any new investment—
1. What’s new at work?
Has the company announced any big plans that could lead to big earnings down the line? Look out for news of product launches, acquisitions, expansion into new markets (don’t forget to check markets domestic and abroad). Don’t be fooled by savvy marketing and overused buzzwords like “innovation.” If a company has an innovative product, they probably don’t need to tell you it’s innovative. Just like if someone’s rich, they don’t need to tell you that they’re rich. Ya feel me?
2. Let’s get… political?
When you’re trying to project how a company might grow, it is very important to consider how the industry at large is going to change within the window of time you’re planning on investing. Let’s say, for example, that the year is 1960 and you think a Cuban-based cigar company is about to take off. You pour all your money into that investment and then a little thing called the Cuban Missile Crisis happens— and all of a sudden, the U.S. bans products from Cuba.
To try and prevent a sticky situation like this from happening to you, look at trends in that company’s industry: is legislation going to change that affects how the company can operate? Does the company sell a technology that is at-risk of becoming obsolete? Here’s a biggie: will this industry be affected by which political party is in power?
If you’re not looking ahead, you’ll fall behind.
3. Who’s in the boardroom?
This is another important element I always look into: corporate leadership. Has the company recently replaced a CEO? Is the company’s C-Suite clued into their customer’s demographic? For example, for a long time, the cosmetics industry was run by men who were targeting their products to women. Later, these executives realized it made a whole heck of a lot of sense to have a woman, someone who could speak to the perspective of the target customer, in the room when key decisions were made.
We all have cultural and social blindspots— myself included. And if a company’s executives are all demographic clones of one another, then they probably have the same blind spots. It’s important to have a diverse team, one that includes the perspective of key consumer demographics. Plus, obviously, we want to support companies that are taking Diversity and Inclusion seriously. Don’t forget that with investing, just like any other financial exchange, a dollar is a vote.
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