Common Stocks and Uncommon Profits and Other Writings summary

Successful investing is a lot like the work of a detective, as you need to research your topics thoroughly and analyze all available data to be effective.

When considering a company’s investment potential, you’ll want to collect detailed information about the company from every possible angle.

Once you’ve identified a company with good long-term growth potential, is it time to buy?

As mentioned earlier, stocks are often over- or undervalued, so how can you ensure that you get the most bang for your buck?

Doubt is natural. Inevitably, once you’ve identified a stock that you want to buy, you’ll feel the pangs of doubt that cause you to hesitate.

A successful investor however has no room for doubt. Don’t hesitate once you’ve identified a company with profit potential.

So far we’ve examined how to win big with high-growth company investments. Yet for some investors, a more moderate profit strategy with gradual but consistent growth is more attractive.  

As a conservative investor, you want a strong company that still has the potential to grow. If you’re trying to play it safe, you shouldn’t invest in start-ups, no matter how promising they appear. Rather, keep your eye out for large, established companies that have a proven track record of profitability.

If you are a conservative investor, it’s also important to examine a company’s employee base and learn more about how the company treats them. There are two main reasons for this strategy.

First, a company’s growth potential is entirely dependent upon employees who put into motion the company’s strategy. Indeed, all of a company’s advantages are the direct result of work performed by its employees.

When evaluating a company, a conservative investor should look into the future. Not only must the company be strong today, but also it must have the means to protect its position over time.

When making this evaluation, an investor should view a company’s profitability not as the sum of its returns, but rather in terms of the size of its profit margins. The bigger the better!

A company can be incorrectly valued based on the whims of the investment crowd. As you’ll see, a stock’s value is even more subjective than that. In fact, its value changes from person to person.

Indeed, a company can be worth more for a risky investor than for a conservative one.