With the rollercoaster action of the stock market, you can’t be too careful when it comes to choosing the right investment opportunities. Before plopping your hard earned dollars down on an individual stock, you should (as famous investor Peter Lynch advises) dig up all the information you can about how the company runs and even more about the people who run the firm.
Research is a bear, and to amateur investors seems like a black hole waste of time. However, on our Stacking Benjamins podcast, Sharon Lechter, co-author of the classic Rich Dad, Poor Dad, said that numbers tell a story of a company. They give you the heartbeat. When you research online, it’s great to have a couple of bookmarks to sites that have all of the company leaders’ pertinent details already laid out for you. You can research people and companies ranging from General Motors to more exotic searches like Ehsan Bayat afghan wireless by using sites like Bloomberg or Yahoo Finance before you invest any of your money into the stock market.
Where To Focus Your Attention
When you use an online data site, you’re presented with a TON of data. It’s important to know where to look.
First, you’ll find out the name of the people who run a company. Each person has his or her own profile, which details key facts about their background that will either make you more confident about the company’s leadership or convince you that perhaps you should look elsewhere to invest. However, simply knowing the names of the people in charge is only your first step in learning more about the business in which you are interested.
As an example, I once was introduced to a new biotech firm that a client liked. When I researched the company officers, it turned out to be a father and his two sons. Knowing that there are plenty of people out there who aren’t related to the founder who can add value….AND knowing that family politics can wreak havoc on a company, I was inclined to say, “No thanks” to that stock.
It’s important to dig into the formal training each leader brings with them. Under the heading of Education, you can read about what colleges or universities these people attended, what kinds of degrees they hold, and when they graduated. Some profiles will go into great detail while others will contain little if any information at all about the people’s formal training. Nonetheless, this leads to questions which you’ll want to answers. Holes in resumes aren’t bad….they show you where to focus your energy searching and tell you more about what you still need to uncover.
Next, turn your attention to these individuals’ background in business. You’ll want to know what positions they’ve held, what companies they previously worked for, and what committees or programs they have served on that impact their leadership capabilities. On Bloomberg, you’ll find all of those details under the Background tab, but you can find them in similar spots no matter what site you use. When you know that a company is headed by people who have experience in this industry or one like it, you can feel more confident about leaving your money invested rather than taking it out because of poor leadership. Because companies also about about people and partnerships, you can also get an idea into alliances the company might form in the future.
Next, leaf through the board of directors list. Most sites have a link available for finding out more about the board of directors for a company. You can find out the names of the individuals who are serving as the board’s leadership, how long they served, and what qualifications they bring with them. The president or CEO only partly impacts the success of a company. Its board also plays a significant role in how well the business grows.
Knowing the leadership of a company is one important step in deciding whether or not to invest in a particular stock. While you can just throw money at your net “favorite” idea, you’ll find a ton more success if you actually dig into the heartbeat and then take a leap that involves a lot less faith and a ton more data.
Like Us? Sign Up!
Subscribe to get the updates from The Free Financial Advisor.