One of the most respected investing icons in this generation is Warren Buffet. You may have heard from experienced traders and investors that Warren isn’t actually investing in stocks. But that he is actually buying companies.
In a way, if you buy shares of a good company, you are indeed buying a portion of it. You become a part owner.
Mind you, Warren Buffet is not the type of investor who buys stocks on a whim. He looks at certain factors when picking stocks for long term investment.
This makes perfect sense as you really should understand the financials of the company, its broader business trends, and to understand if the long term prospects of the company is good and whether the company is valued right.
Looking for a good stock investment? Be guided by the following factors:
One of the first things to look out for in a good stock is a company run behind by good and trustworthy leaders. There have been so many companies that are run by “managers” and not by true leaders.
To look for a good stock, make sure that the leader behind it is trustworthy. Someone who is capable of running his or her company through ups and downs without compromising its core values and reputation in the industry.
Do some research and find out whether they have been with the company for a long period of time already. This is the litmus test of whether he or she is a true leader who can stand the rigors and tests of time.
Whether it is a small and starting company or a big one, you always want to invest in its leaders.
2. Unique Selling Proposition
The next factor to consider is the company’s unique service to the public. Its product or service should be able to give answers to the needs of many customers through an experience that is apart from the usual.
One good example of a Filipino company that presents a commendable and unique selling proposition is SL Agritech Corporation which hopes to introduce new technology for better rice production. For a rice-loving nation and a country where the farmer population is aging and the fact that SL Agritech is the biggest producer of hybrid rice seeds in the country makes this company an interesting pick when it debuts in the stock market.
Another company that is definitely unique is WAV or AudioWav Media Inc. The name may not ring a bell to you but this Filipino technology company is the pioneer in multi-sensory branding in the country that has established its presence in Singapore and the USA. (Watch CNN’s feature of WAV here)
Using customized in store music and messaging, scent diffusing technology, virtual reality, and mobile app, WAV’s innovation has pushed the boundaries of branding and marketing. WAV’s multi-sensory tech stimulates the different senses of a customer through visuals that come from customized TVs, LED sign ages, and mobile screens.
It also uses multi-channel speakers and audio messaging to set the feel of a business space. And finally, WAV introduced a technology that sets a distinct scent that you will notice when you visit the shops of their clients such as Wendy’s, Gold’s Gym, and Wellcome.
The real deal here is that WAV invests heavily on their R&D or research and development to help them expand across Asia and the rest of the world faster. A good company should have a very competitive R&D so they can innovate faster and move ahead of the competition.
WAV is set to make its public debut in the Philippine Stock Exchange and its unique selling proposition makes this technology company a good IPO stock pick for 2017.
3. Earnings Growth
Good companies should grow over time. But you also need to understand how fast a company grows into the future.
There is no right answer as to whether a company will last a lifetime or beyond. But one factor that you can look into is its past and current earnings growth.
A company should also be able to withstand the toughest conditions of the market and sourest of economic crises. This characteristic contributes to its record of stability, profitability, and continuous growth as a quality stock.
A good stock is also recognized a leader in its particular industry.
4. Price-to-earnings ratio
P/E ratio or price-to-earnings ratio is an indicator of how much profit one will be getting from an investment. By using the P/E ratio, one can get the annual “interest” rate of a company.
For example, if you invest in a company with a P/E of 18, then your annual returns are just 1/18 or 6%.
For you to be able to determine a company’s P/E ratio, you must first look for their financial statements through credible sources such as their website or the Philippine Stock Exchange library, both online and at the PSE center. Stockbrokers also provide information of a company’s P/E ratio.
As an additional information, the lower the P/E ratio is, the shorter the time you will be able to get back your investment plus your earnings.
5. Signs to identify the future
The last consideration to know if you are investing in a good stock is the company’s product lineup and technology.
A good company’s product is considered superior and the best in the industry if it invests in technology, innovation, and social media. It should be able to position its products in broad global market trends to push up its profits.
It’s no magic to identify the future. But if a company is open to good change and is able to deal with the fast moving trends, then you are choosing a good stock for your portfolio.
That’s why I am very excited for the growth of tech startups in the Philippines since I personally believe that Filipinos are one of the best in the world in terms of digital technology. Filipino technology companies such as WAV has great potentials to conquer the global technology community.
And if AudioWAV Media and other local tech startups are going public in the next few months, they will definitely be part of my personal top 10 stock picks to end the year right.
Evaluate and look at these 5 qualities to know if you too are about to invest in a good Philippine stock.