Mention investment and many people will think about purely financial matters: the company’s stock price, the payout per share, and whether the company had any problems recently.
Those are good places to start. But there’s more.
Think about what the company is doing. What services or goods is it providing? Is it just some new way to send pictures or wisecracks to people, as much of social media seems to be? Or does it aim to provide something that individuals, businesses, and governments really need?
Definition of really need: Energy is at the very top. Without energy, we will all be back in the Stone Age. Energy is needed for everything -- bringing food from farms and slaughterhouses to markets, to manufacture all the gadgets we take for granted, to keep the lights on and the water flowing – everything!!
Next are other physical items. One can live without social media (yes, call me ironic for saying such a thing on a website); one cannot live without food and water. Then there are the myriad other items that we need: clothes, books, cooking utensils, weapons (for individuals, security firms, and governments) and many more. If a company is making these things, has good sales, and is keeping its financial house in order, it’s probably a good bet.
Services: Some services are more recession-proof than others; health care comes to mind. No matter what the politicians come up with, people will still get sick or get injured, and all of us will get old. If a health care company is being well managed and has good sales, I’d definitely consider it.
Next, ask where the company is. Companies have to deal with governments where they are based or working, and how a government is run makes a huge difference in terms of whether prosperity is possible in the country that a government controls. Obviously, no country is perfect; this is Earth, not Heaven. However, one can’t go wrong by using the list of hallmarks of good government in The Wealth and Poverty of Nations, a most entertaining book by the late David Landes. Here is a condensed version:
1) Secure private property rights, which will encourage savings and investment.
2) Secure personal liberties against governmental tyranny and crime.
3) Enforce contracts.
4) Government should be stable, it should abide by publicly known laws, respond to grievances, be honest, and be moderate, efficient, and frugal.
I look at investment decisions from a political science and history standpoint. What was done in the past affects what we see today, whether in business or in government. Legislation, law enforcement actions, and military actions of governments affect other governments, businesses, and individuals like you and me. That’s the perspective I can bring to your investment decisions.
Do you want me to write, research, or proofread for you? Contact me today!