Given the crazy events of this year the stock market has been extremely volatile. If there is one thing that the stock market does not like it is uncertainty yet that is something which we have seen in abundance this year. There have been many smart investors like David Walsh East Hampton investor, who has found the right strategy to do very well this year, but the same cannot be said for everyone. If you are interested in finding investment opportunities during this tumultuous time, then here are some important things to know about companies before you invest.
You don’t need to know the CEO inside out, but you should certainly have a good understanding of their track record and their background in general. Find out how long the CEO has been in place and what they have done with the stock price of their previous companies.
The Business Model
If you are going to be investing in the equity of this company then you need to have a good understanding of what its strategy is. Are you investing in a firm which looks to make money through the mass sale of low cost products or is it a luxury brand which will make big money on less sales? There is no perfect strategy of course but you should know what to expect from your investment.
It will also be very important that you have an understanding of the competition which this business faces, both in terms of actual competitors and whether or not the market is in favor. For example now wouldn’t be a smart time to invest in a company selling DVDs, because the market is completely against that having moved on. Check out all forms of competition before you invest.
The current climate in the leisure and tourism industry is the perfect example of why you should pay attention to what the current climate is. These may prove to be great opportunities for companies which are able to survive, but there is of course no guarantee of that. Beyond the company itself you have to focus on the sector and how it is currently performing.
Revenue and Net Income
As basic as it sounds, it would be remiss not to mention that you should be looking at the revenue and the net income of a company, as well as their gross profit. Ultimately you need to know how much money the business is making before you decide to dive in with your investment.
Debt to Equity
This ratio takes into account the total amount of debt which a business has, versus the amount of equity which the shareholders have in the company. This ratio will give a good picture of how the business is doing. The important thing to look for here is that the debt is not larger than the equity which the shareholders have.
Always do your homework before you invest in a company.