Before buying the stock of a company, check the followings :
- Does the company currently have the potential of several years' sales growth?
- Is the company likely to produce new products and processes in the future?
- Is the R&D department effective, given the company size?
- Does the company have an above average sales organization?
- Does the company have a worthwhile profit margin?
- What is the company doing to maintain or improve profit margins?
- Does the company have outstanding labour and personal relations?
- Does the company have outstanding executive relations?
- Does the company have depth to its management?
- How good are the company cost analysis and accounting controls?
- Are there other aspects of the business which will give the investor important clues as to how outstanding the company may be in relation to its competition?
- Is the company short-termist or long-termist?
- Will there be equity financing in the near future that will damage the stockholders' interests?
- Do managers talk freely to investors when all is well but clam up when there is trouble?
- Does the management have integrity?
The List of Don'ts
- Don't buy into promotional companies.
- Don't ignore a good stock just because it is traded over the counter.
- Don't buy a stock just because you like the tone of the annual report.
- Don't assume that a high price at which a stock may be selling in relation to earnings is necessarily an indication that further growth in those earnings has largely been discounted in the price.
- Don't quibble over eights and quarters.
- Don't overstress diversification.
- Don't be afraid to buy on a war scare.
- Don't forget your Gilbert and Sullivan. Growth stocks may change rapidly and historical price movements and EPS will give no hints of such changes before they occur.
- Don't fail to consider time as well as price in buying a true growth stock.
- Don't follow the crowd.
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