Wednesday, April 6, 2011

Selecting Stocks From A Shopper Viewpoint

By Samuel Ludwig

Investing in the stock market sometimes boils down to one essential element, namely good choices. No matter how well we do our research, how often we buy and sell, or how much we pay experts for their tips and advice, without choosing stocks that represent value, we won't succeed. Although some are good at predicting the direction of the market and timing the ups and downs, if they don't purchase the right stocks, they will still meet with difficulties when trying to reap profits.

For that reason, some of the best paid people on Wall Street known primarily for their talent at picking stocks. Financial advisors give talks and write books and newsletters about how to choose stocks that will outperform the market, and most experts echo the same sentiment and agree that one of the best ways to judge a stock is from the point of view of a consumer. By using instincts we have already honed as ordinary shoppers, we can often ferret out information that even the most skilled and software-savvy market watchers miss. While they study analytical charts, earnings reports, and the stock exchange ticker tape, folks just like yourself actually do business with the companies they invest in, because their experience as a customer speaks volumes about the value of the company and its products and services.

Here are the types of things to go looking for as signals of a company's worth :

1) How popular is their product? If everybody you know uses it, and is pleased with such items as price, client service, and trustworthiness, the company is maybe well situated among the contest.

2) Are the staff satisfied? One of the greatest paths to judge a company is by chatting to staff. Many corporations put on a good faade, but under the fancy promoting is lots of discontent. But if workers like a company particularly if they're keen on it enough to buy stock in it that is a good sign.

3) How well known are they? You may find a great startup company with all the trappings of success, but discover that it is lesser known. Many small or regional companies are popular in their own back yards, but the rest of the world may not yet know about them. Buying such unknowns can be a great way to invest in the next hot stock. If the fundamentals look good, sometimes being lesser known is a good thing for investors getting in on the ground floor.

4) If they went into Chapter 11, where would you go for similar services and products? If you cannot think about a convenient alternative, the company is perhaps in a focused market that enjoys purchaser fidelity and repeat business.

Shop around, and notice what you see and how each business makes you feel. Then trust your intuition. Make a list of companies that get your attention, and then call their shareholder relations department and ask for more details. By starting your list with companies you already have a first hand experience of, you raise the chances considerably that you will make smart choices.

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