Where are the best investments today? Anyone who invested in stocks in January of 2014 has probably made money by October. But the market rally is starting to sputter. In retrospect one of the surest ways to make money in stock investing this year would have been to buy shares in an ETF that tracks the S&P 500. But is that the best choice going forward? Where are the best investments today? Fundamental analysis is the key to value investing. A good investment holds the promise of profits and protection against loss, intrinsic value and margin of safety. Where can these twin pillars of long term investing be found today?
Qualities of the Ideal Stock Investment
The ideal stock investment is in a company that makes something that fulfills a basic need. The company should control its market sector through patents, aggressive research and development, continual new product development or by having such a high cost of entry business that competitors cannot make a dent in their profits. The company also needs to have a substantial margin of safety. This can be cash in the bank or unencumbered property. It should also include the fact that whatever the company makes will not soon be obsolete. Obviously a prosperous carriage maker at the end of the 19th century would have had to move into the auto market. And the company must not be so dominant in its sector that it is broken up by antitrust legislation such as happened with AT&T, the widow and orphan stock of much of the 20th century.
Making Things That People Need
The best investments in the coming years will be in things that make a difference. Drought is plaguing much of the world and causing civil strife. Cheap and efficient water purification systems could make huge differences in many parts of the world. One of the best stock investments today for profits tomorrow could well in a startup company that will provide clean and pure water where it currently does not exist. The internet is here to stay and the world is wired. A company like Cisco that virtually controls the world of routers will likely prosper into the indefinite future. And anyone who invents a cure for cancer will write their own ticket, so long as patents last.
Making Things That People Want
We wrote years ago about investing in beer. They were making beer in 9,500 BC. It will be around for at least that long again. This is a product that makes money and will not go away. Consumer products in general are safe long term investments. What one gives up in quick profits is made up in steady gains and dividends.
Doing It Right
Good management can make a huge difference between moderate profits and great profits. Where are the best stock investments today? Look for a well-run company. Look for a company that keeps its costs down and efficiently brings products to market. As always to your own homework and be satisfied with routine, steady profits.