Buying stocks for the first time is so overwhelming and if you listen to the news, you will be terrified to do this on your own. However, it doesn’t always have to be like this. We share how we determine our long term investing in stocks through looking at various aspects.
Market Cap
The first thing we like to determine is the Market Cap compared to the Enterprise value. We look to see if the Market Cap is larger than the Enterprise value in order to help determine if the company has more cash than debt. Generally speaking, it is always nice to have a company that has the cash to make it through a downturn in the markets. This often will allow a company to stay afloat longer during turbulent business times. Below is one example of what we look for.
Insider Ownership
If an insider is buying shares in their company, often they already know something that will help their company in the future. It could be a merger, news of a patent or anything else that would net the company in a positive way. Not always does this work but, generally speaking it is another piece to the stock analysis to help make a decision on the stock.
If you look at the example below you can see the amount of purchases, time frames, and who bought them. Now, what do you think the insiders know about this company? Why is the Dir, Pres, CFO, CEO, and COO all buying this stock over this 8 month period of time? Do you think they may have something in development that could booster the company? All of these questions and more are what you need to be asking yourself before making any decisions to add to a watchlist.
What Does The Company Do?
The next part in the analysis stage is to determine what the company does? Ask yourself how will this company help humanity? Ask where do you think this company will be in 10 or more years? These questions will help you determine if you found a company that you believe in and you think will stand the test of time without major competition.
In addition, It is always great to see the company from their website and to ask employees what they think of the company. You generally, get a good indicator as to if it is a good company or not.
Look for Patents
Your next job is to find any patents that maybe owned by the company. These patents are a key part to determining if the company may have an edge or cornered a market to allow them to create a moat. With a moat, this allows them to be competitive in a niche they have decided to be a part of. The image below is from a company that has a patent with the USPTO.
Increased Earnings
You want to look for increased growth over time with the stock. I generally look for at least 15% growth year over year on average. It is important for them to be increasing their earnings and growing their company. If this is lacking, there is something fundamentally wrong with the company and you need to make a decision as to if you really want this risk.
“To make money in stocks you must have the vision to seethe, the courage to buy them, and the patience to hold them. Patience is the rarest of all three”. Thomas Phelps in 100 to 1 In The Stock Market
A Few Tips to Keep in Mind
These are just a few tips of many that we use to keep in mind while studying a long term buy and hold in a company that you want to hold in your portfolio for years to come. To learn more about how to find the best stocks that you will want to keep forever you should read and watch the content in Cyber Money.
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