Potential,  Profit, and the Profile.

 Potential: You must look to see if the company is making money, or will be making money in the future. How and if they do this is the first thing to consider. Buying stocks is like buying a lottery ticket, except you have a lot more information to consider before deciding which ticket to buy ,Quick Pick is simply no good.

Profit: The  amount of money the company will make in excess of its costs, how much do the investors get? Some Companies use profits to pay investors what are called dividends. Every share gets a check in the mail for an amount equal to what the company decided to pay in dividends. Usually dividends are only given by companies who have a lot of surplus cash flow and have been around a very long time.

      If you expect the company to have great potential profits, they are for example developing a new drug to fight cancer and if it passes FDA approval then there is a possibility that they will have a huge increase in profits and thus your stock investment would then turn into a bull stock. Investing in “Biotech” companies like drug manufacturers has a very low rate of success but like the lottery if you hit it you usually hit it big time this is also true of technology stocks. If you are investing a small amount of money you need to find companies before they begin their bull stock run.

Profile: This is the company in a nutshell, what is their industry? What potential upsides are in this industry? For example buying into a company selling 8 track players today would not be a very wise choice. Pick something that you understand very well. This can be applied to almost any profession. Let’s say you are a Janitor and you get a hold of a new cleaning product that amazes you, find out if the company is public and if you can buy shares in it. Buy what you know, don’t let someone else tell you what to buy, if you don’t understand why the company is a good investment don’t buy it. You can find out if a company is public by using the Yahoo finance link to the left or search google.