Question

What non-financial characteristics do you examine when selecting stocks?

Investment Questions.

Answer 1

When you are making an Investment in a stock for the long term, you do not just have to look at the price of the stock and its future growth, there are lot of other factors that have to be considered like:

• Reputation of the compnay in the market: It is one of the most significant aspect for the long term investment in any stock of the company because even if the company is profitable for now but its market reputation is taking a hit because of any reasons be it product quality or legal issues, in the long term it is going to affect the profitability of the company.
• Innovation in services : Any company which is very profitable now but not spending resources on the research and innovation will not be able to survive in the market in the long term. One of the example is the Nokia mobile phone company, at one point of the time every 3 out of 5 phones sold globally were of Nokia but it missed on the touch screen and eventually went out of the business.
• Ethical practices followed by the company: Every company these days is opertaing in the highly competitive environment, so everyone is trying to outsmart others but following practices which are unethical like manipulating accounts is a very serious issue and once these things are discovered the stock prices of these companies crashes like a pack of cards.
• Management ability and its reputation : In the long term what matters the most is the how much capable is the management team CEO, CFO CTO CMO, because all the strategic decisions are being taken by these people and if they are not taking right decisions, that can seriously hurt the long term growth of the company and might create a situation of insolvency and bankruptcy.