Invest With Eyes Wide Open

Unlike gambling on a soccer match (think Russia 2018 and make that soccer matches) or a horse-race, you have more leeway to make a sound investment by learning how to pick a profitable stock.

Photo by Roberto Nickson (@g) on Unsplash

To understand the elephant-anatomy of a share, you can invest with eyes opened wide by using a four-step formula which The Fifth Person has called The Investment Quadrant comprising the following four components:

1. Business Quadrant

2. Management Quadrant

3. Financials Quadrant

4. Valuation Quadrant

You will need to look at the Business of your target company (e.g. relative competitiveness, flair with automation/innovation and quality of products) and the industry in which it operates (e.g. sunset industry, environmental impact and future growth prospect). 

The company is only as good as its Management team, particularly, its top management which could determine whether it succeed or fail spectacularly. Horror of horrors even in this time and age, notwithstanding public scrutiny and security-industry watchdogs, there are CEOs and Executive Directors who commit unimaginable (that's how creative they are) white-collar crimes or blatantly neglect their duties and responsibilities.

While the Financials of a company are rudimentary factors for seasoned investor to consider, the rookies would pass by them and go with their gut feelings.

Then, there is Valuation which offers a more clinical research of the intrinsic value of a company through Book Value approach, Equity and Debt approach, Discounted Cash Flow approach, Relative Valuation approach and Option Valuation approach.

Click here for The Investment Quadrant: The 4-step formula to picking the best stock investments.