Have you ever wondered why some companies' share price skyrocket beyond the stock market roof that you wished you bought into the companies when they were still trading in cents?
Google Inc, Microsoft Inc, Coca Cola, IBM, Pfizer, Bank of America, Gillette Inc. These companies are some of the BIG TIME winners in stock market that once traded below $5 before their value rose exponentially.
Take Google Inc for instance, their price per share as at when this report is compiled ended the day at $1060.79
If you had bought just 100 units at $5 (when they started small), that would be $500 investment capital.
Multiply that units by the current market price - $106, 079
Someone living in Nigeria would have earned far above that when you factor in exchange rate gain.
This is just an example of how great stocks can multiply your money if you do your homework very well.
The big question is How Do I Spot Stocks Like This In Advance Before Price Gain?
Here are 3 Little Known Secrets To Picking Such Stocks:
1. Solve a Problem with a Competitive Advantage: A great business is one that solves a persistent problem and has a competitive advantage - this is an extra power which no other business has that gives the company a unique advantage of controlling price, hence translating to higher profit.
Before you buy into a company, find out if the company has Patent or Copy Right Advantage on the product they sell. This kind of advantage is mostly found in Consumer and Healthcare sectors of an economy.
This kind of advantage will definitely reflect in their historical Profit Margin and Return on Equity.
2. Management Experience: Another important factor to watch out for is, do managements have good track record of same-industry experience, qualifications and performance?
You have to trust a company's manager before you sink your hard-earned cash into their business or else you will not be better than someone who is GAMBLING.
Look at the term - 'same industry experience' not just experience, it has to be in the same industry the business is operating as this would help them understand government laws, regulations and current trends affecting the business for better decision making.
3. Free Cash Reserve: You can also call it Owners Earning: this is the cash available in the company's bank account. A good company should experience growing cash reserve to finance expansions yearly and meet contingencies. It is the most important item investors use to value a business and know if the business is worth investing it.
Owners' earning is calculated as thus: Net Income + Depreciation - Capital Expenditures for the year.
When you find a business a like this, read Luke 6: 48