Investing seems complicated, and in fact, half of Wall Street does make it sound complicated by using highfalutin words, charts, and concepts to make sound more knowledgable… Here are a few tips to help you pick your next stock:
Step 1: Look for Companies You Believe in 💡
If you don’t believe in a company, it probably isn’t a good idea to invest in it; if you wouldn’t buy the product, don’t buy the stock.
For me, a stock I always looked at for this kind of concept was Costco (NASDAQ : COST). Costco has always been one of my favorite stores, and every time I drive, their lots, without fail, are full. After all, they must be doing something right if their stores are always full.
However, this shouldn’t and most definitely isn’t the best way to pick a stock to invest in. It should just be a gauge or recommendation to get you looking in the right direction
Step 2: Look for companies with constant increasing revenues and profits
Believing in a company is a decent start but you also want to see numbers backing up what you believe. Specifically look for businesses that have steady growth (increasing revenues and profits in three consecutive years)
Revenue growth: If a companies revenue has increased three years in a row, it shows that new customers are being attracted to the business or that they are selling more product.
Profit growth: Increasing profits indicate the the company is not just selling more but is doing so efficiently without having to increase production costs.
Step 3: Do a quick “MOAT” check
Now what does that mean? Well, its basically how competitive the company is, you can ask yourself:
How saturated is the market for this product/service?
Can this company be easily replicated? (something that you do not want)
Are the barriers to entering this industry high? (something that you do want)
Now what?
Picking your first stock might feel a little intimidating, but it doesn’t have to be. Start with a company you're familiar with and believe in; confirm that its financials and competitive edge look promising.