Some Questions To Ask Before Buying A Stock
Here are some questions I normally ask myself before making an investment decision:
1. What does this company do to make money?
2. Will these ideas make money consistently over the long-term?
3. What are the chances this company will go out of business in the next 10 years?
4. Does the company have a 10-year history of solid earning power? If not, what makes me think they will over the next 10-years? If they won’t, why am I buying the stock?
5. What is the company’s normal (in the statistical sense) annual earning power per share? [1]
6. Is this particular company strong enough to maintain and grow their normal annual earning power per share over the next 10 years?
7. Can I trust the earnings numbers?
8. Do the reported earnings, owner earnings, and balance sheet earnings match?
9. How many shares are really outstanding? What are the chances for dilution?
10. Would I buy the whole company for this price? If I did buy the whole company, would I feel comfortable being a passive owner?
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