Finding the Perfect Company

The perfect company - it's the holy grail of the investment world. The company that will make its initial investment hundreds of times over. It's what everyone shoots for. To have bought Microsoft when it first went public... It's how fortunes are made. What does make "the perfect company"?

The search for the perfect company is not the pursuit of day-traders or market insiders. They're looking for quick and dirty returns. High speed, high risk, high stress. No, the perfect company is more along the lines of what an individual investor - like you or I - would look for. I don't want to have to have my hand on my mouse until the closing bell just to make sure I don't lose my shirt. I want to buy a position in a company and know that regardless of what happens today or tomorrow, eight months from now, my portfolio will be worth more than today. I'm not talking about a laissez-faire approach to investing - far from it. What I'm talking about does take a time investment as well, in research, understanding the ins and outs of a company, but one that will be paid off in spades.

That's an approach that I've taken seriously (guess what, we're talking about money here), and that I feel makes the market less of a gamble. It's also a mantra that has gotten me yields in the double digits over the Dow to date in a markedly tough year.

So, you may be asking, "What is the perfect company? What traits should it have?"

One of the most important things - in my opinion - about investing in a company is the feeling that you're a partner. It's essential to know the company inside and out. Be aware of all their products, as well as all of their numbers. Above all, you should be excited in the company you're investing in. If not, what's the point? Your gut is an important part of investing. If you're portfolio doesn't get you going, you might as well be gambling in Vegas. At least you'd get comped.

In the perfect company, fundamentals are, well, fundamental. It's so important to familiarize yourself with the annual and quarterly reports (the 10-K is your friend) and listen to quarterly conference calls (both can be done online, very easily. Check out the company's investor relations site to learn more). Remember, you're not banking on market psychology, you're focusing on profits. No matter what happens to a company, if they've got juicy profits, their share price WILL go up. There's no two ways about it. Make sure that the company is making money and you will be too.

Emotion has a natural part in this. If you're loving a company, it can be expected that you'll be blinded by that fact when it comes time to sell. One remedy for this is defining a reasonable sell point before you even buy. All too often people watch their positions go up past their expectations only to see them fall back down below what they bought for. Have a look at analyst estimates as well as other factors (after following the market for a little while, it becomes sort of instinctual) to try and determine a price to sell at no matter what. Just as importantly, don't forget to reevaluate frequently. Things change, you don't want to miss out on huge gains or look toward a share price the stock will never get to. News and economic factors will influence things, change you're estimates appropriately.

Just as you should reevaluate your sell point for a stock, you should often reevaluate your position in the company itself. While a company may have been exciting and ideal for you when you purchased their stock, things change. Maybe the product line you though would take off didn't. Maybe their visionary CEO retired. Maybe something just doesn't feel right. Ambivalence has no place in this game.

Don't be afraid to speak your mind on the company's business, either. You're an owner, however small, and have an obligation to protect your investment. While you might not have the same clout or voting ability as an institutional investor, or anyone who measures their equity in percentages of the company, but sometimes, making your points known makes all the difference. Lobby to those powerful holders of the company as well as other individual investors. (We'll have more on making your piece heard in an upcoming issue).

If you want to try your hand at speculative, technical trading, this isn't the method for you. If, however, you want to shoot for a combination of excitement and profit, you may want to look into this a bit. It's worked for me. If you're a seasoned investor, or a newbie willing to learn (through methods that don't require money initially) you may find this to be a particularly rewarding idea.

Jonas Elmerraji is the founder and editor of growFolio, the world's first free online investment and business magazine. Issues are available online at http://www.growfolio.com

---

Secret Stock Options Trading Strategies the Experts Don`t Want You to Know

To understand stock options, we need to look at Webster’s... Read More

The Myth of the Earnings Yield

AbstractA very slim minority of firms distribute dividends. This truism... Read More

Bad News - Why The Financial News Media Can Cost You Money!

The communication innovations we have around us today like the... Read More

Building The Foundation For Wealth

You wouldn't build your home on anything less than a... Read More

Annuity Investment - The Whole Truth

Do you ever feel like you haven't been told the... Read More

Scots Beat Yanks in China Bank Deal

With visions of an ATM in every neighborhood in China,... Read More

The Three Legged Stool

My paternal grandparents were born near Lake Como, Italy. My... Read More

Asset Location ? Increase Investing Returns & Reduce Your Taxes

Location ? Once the holy grail only for real estate... Read More

Advice for International Investors on How to Safeguard Their Profits

What are the risks?Today, investors are increasingly turning to global... Read More

Powerful Hidden Techniques Mystery Formula - The Covered Call Option Trading Buy-Write Strategy

For better or worse, most option trading investors purchase stocks... Read More

Angel Investors: Who They Are & When Are They Appropriate

Angel investors are individuals who invest in emerging business ventures.... Read More

Investing As A Sport?

I said last week that money doesn't generally buy happiness,... Read More

Should You Put Your Annuity in an IRA?

Let me start by answering that question...if an annuity fits... Read More

The Difference Between Investing and Trading

Investing and Trading are not the same thing. The returns... Read More

Real Estate Clubs Hot Among Investors

Six or seven years ago, the stock market was booming,... Read More

July 2005: Hurricane Forecasts for Weather Traders

Tropical Storm Arlene formed as a tropical depression on June... Read More

Day Traders and Swing Traders and Options? Maybe!

Typical day traders and swing traders look for stocks with... Read More

Planning Starts with the Basics

When developing a plan for your finances, the toughest question... Read More

Critical Options Investing Tip When Trading Naked Calls and Puts

An option is a derivative trading product that is best... Read More

Larry, Moe and Curley, Investment Brokers

Larry, Moe and Curley were sitting in their favorite restaurant... Read More

It Must Be Joe Cockers Market

Agonizing displays of poor theatrics failed to entertain my mind... Read More

Lobster Trapping for Investment Ideas

Recently, my family and I took a trip to Maine... Read More

How Do I Start Investing Online and What Are Some Basic Tips?

If you are new to investing online, don't put your... Read More

Before You Start Investing

There maybe several reasons why you to want to invest... Read More

Overbought/Oversold

Has your broker ever told you that a stock is... Read More

Super Rules, OK?

Do you rule your superannuation or does it rule you?It's... Read More

Everybody Wants to Know How to Invest

Those unfamiliar with the process of making and managing investments... Read More

Love The Thrill of Risk? Invest in an Annuity!

With the stock market in steep decline, people are looking... Read More

How to Choose the Right Share Class

You'll want to opt for the no-load or institutional share... Read More

Find Your Investing Soulmate on the Jersey Turnpike

As a followup to a previous column, "Irreconcilable Differences," I... Read More

In a Time of Need

As I take my leisurely walk with my dog through... Read More

Delist My Corporation Please

It use to be said that once a company was... Read More

Investing In Sons Business Could Cause A Real Family Feud

Q: My youngest son wants to borrow $5,000 to start... Read More