What Makes a Company a Good Investment Fit?

Investors in the Financial Markets are always on the look out for good companies to invest in.

In this post, we will discuss some of the aspects that you must look into while analyzing whether a company is a good investment bet.

Competitive Advantage:

What competitive advantage does the company, you are looking to invest in, have in the markets in which it operates?

Generally, competitive advantage comes from product leadership i.e having a product or solution that is far superior than anything that its competitors has to offer.

Competitive advantage also comes from operating in an industry where there are high barriers to entry thereby limiting the chances of a new competitor coming in.

Brand Name that Inspires Confidence:

Does the company have a brand presence that inspires confidence? If this is so, the company might find it relatively easy to launch new products or enter into new business verticals.

A good brand presence also makes it difficult for newer entities to enter into the market and take away market share unless they have a very compelling product offering.

Innovation:

Does the company and its management have a demonstrated history of innovation?

This is especially true for a company that operates in an industry that is constantly evolving, and innovation is the only way for the company to grow forward.

Note that we are not just taking about product innovation here. A company can innovate in the way it reaches and serves its customers thereby creating a competitive advantage for itself.

Regulatory Environment:

Does the company operate in an industry where there is a large degree of regulatory control over its operations. Regulatory control is the control over the company’s operations by government authorities.

Regulatory control might take many forms. For example, the authorities might regulate the price at which the company sells its products to the customers or the channels from which it sources its raw materials.

While every company operates under a regulatory framework that ensures that the company does not indulge in any unfair or unethical practices, excessive regulatory control might stifle growth and innovation.

Corporate Governance:

The goal of Corporate governance policies is to ensure that the management of the company takes decisions that are good for the long term success of the company.

In spite of all the regulations in place, we often come across situations where the management indulge in unfair practices which benefit a particular group of shareholders to the detriment of the other minority shareholders.

While analysing a company, dig deep to find out if there has been corporate governance issues related to its management in the past. Our ultimate goal is to invest in a company with a strong management capable of taking the best decisions to ensure the long term growth and prosperity of the company.

Hope you liked our presentation on the finding good companies to invest in.

Thanks for your time.