What's the Next Investment Tip

Investing is probably one of the easiest ways to secure passive income. But you have to be alert. You don't have to be the first, but you have to be one of the early ones in line. In addition, you have to follow a few fundamental principles in investing to succeed.

The Top 30 companies will not be in the Top 30 companies thirty years from now.

New technologies and discoveries can catapult companies to the top. Apple was ranked 96th in 1990. Microsoft, Google, Amazon weren't in the top 100 list. Sears and KMart were 15th and 16th, respectively. Companies can skyrocket to the top or burn themselves to the bottom. So do your homework.

It is misleading how financial gurus state that the stock market has continually increased in value. Unfortunately, a rotation of the companies composes these indices like the DOW, S&P 500, and NASDAQ 100. Be aware of the rotation of companies in these indices. A few companies may be added or replaced within the index over the years. The top companies are chosen based on the market capital and the business sector they represent.

THE MOST IMPORTANT PART

Review the quarterly and annual reports and listen to the quarterly conference calls before investing. If the company is profitable, earnings forecasts are trending up, and the company debt is improving, it may be a sound investment.

Here are what I look for in a company.

1) The Company must be a Disruptor.

Succinctly, the company must be revolutionary with its product and services. It must severely eliminate or cripple one or more competitors; it must bring a product to market and thoroughly remove a competitor's product. Let's take Apple and Google. It eliminated many products and companies. The iPhone replaced the Blackberry's phone and toppled Blackberry from the King of the Hill in smartphones. Apple made sleek reliable phones, with applications that worked flawlessly. Google created the android software that offered more applications and uses than Apple.

2) The Company Must Have Room to Grow

In other words, a significant number of people use their products or services. Walmart is the number one retailer that serves people in North America and China. It's easy for them to grow in these markets because Walmart serves a large, affluent populace. You will not see Walmart in small markets because the returns will be small. Amazon found a niche, the internet, and grew in that niche and became a colossus. You don't invest in a company with a small base of customers. For example, the volume of speedboats sold in Missouri pales compared to the number sold in Florida. The amount of sales and profits from a boat dealership in Florida towers that from Missouri.

3) Your Friends and Family Brag about their Newest Toys

At work, the talk centers around Jane buying a Tesla. She raves how much she loves it. It almost becomes a status symbol. People start asking, "Do you like it?"

"Can I see it?"

"Can I ride in it with you"

When Jane convinces two or more friends to buy it, you should look at the company's stock quote and quarterly reports.

4) YouTube and Twitter start talking about the latest breakthrough products.

If you go on the YouTube app and search for the company or product and discover millions of videos and tweets, you seriously need to invest in that company. The positive buzz surrounding the product or company foretells Wall Street's buying. You will be surprised how quickly the latest technology and innovations are broken down and explained on YouTube.

5) Is the company being supported or hindered by its Government.

Amazon has a competitive advantage by selling its product without collecting sales tax. Tesla had an advantage with federal tax credits offered to Electric Vehicle (EV) buyers. Unfortunately, the tax credit only applied to the first 200,000 EV; Tesla has exhausted their EV tax credit eligibility. If Biden's Build Back Better Bill re-introduces EV credits to Tesla, then Tesla will pop.

6) Is the company's products or services #1 or #2 in terms of sales and market share

Jack Welch famously drove GE, a conglomerate of companies, to become lean and profitable. By relentlessly striving all its companies within GE to capture either the largest or second-largest market share in their respective niche. You must ask yourself if the company you plan to invest in has a significant market share. Is that market growing, or is it stagnant for the next 3–5 years? And are any competitors close at hand to dethrone them.

In no way am I recommending the above-aforementioned stocks. I am only using them as examples.