Stock Advice – Selecting Stocks from a Consumer Perspective

May 30, 2010 by
Filed under Stock Market

Investing in the stock market now and back boils down to one key element, namely good choices. Regardless of how well we do our research, how frequently we buy and sell, or how much we pay experts for their tips and advice, without choosing stocks that represent value, we will not succeed. However we are good at predicting the direction of the market and timing the highs and lows, if they do not purchase the right stocks, they will still meet with difficulties when trying to reap profits. For that reason, some of the best paid people on Wall Street known primarily for their talent at picking stocks.

Financial advisors give talks and write books and newsletters about how to decide stocks that will outperform the market, and most experts echo the same sentiment and agree that one of the greatest ways to judge a stock is from the angle of a consumer. By using instincts we’ve already honed as everyday shoppers, we can regularly ferret out details that even the most skilled and software-savvy market watchers miss. While they study analytical charts, earnings incidents, and the stock exchange ticker tape, folks just like yourself actually trade with the companies they put money into, as their experience as a customer speaks volumes about the value of the company and its goods and advertising.

Here are the forms of things to look for as indicators of a company’s worth:

1) How popular is their product or service? If everyone you know uses it, and is content with such things as price, customer service, and reliability, the business is likely well situated among the competition.

2) Are the staff members satisfied? One of the best ways to judge a company is by speaking to employees. Many companies put on a good façade, but underneath the fancy marketing is plenty of discontent. But if staff members like a business – especially if they enjoy it enough to purchase stock in it – that’s a really good sign.

3) How well known are they? You may locate a great startup company with all the trappings of success, but notice that it is lesser known. Many small or regional firms are popular in their own back yards, but the rest around the world may not yet know about them. Buying such unknowns can sometimes be a great way to invest in the next hot stock. If the fundamentals look good, often times being lesser known is a good thing for investors getting in on the floor floor.

4) If they went out of business, where would you opt for similar products and services? If you can’t think about a easy alternative, the company is likely in a niche market that enjoys customer loyalty and repeat business. Shop around, and notice what you see and how each business makes you feel. Then trust your intuition.

Make a listing of firms that get your attention, and then call their shareholder relations department and request more details. By starting your list with businesses you already have a first hand experience of, you raise the chances considerably that you will make smart options.