What is a “Safe” stock? There are many things to consider when picking a low risk stock. Many will say that large companies like Pepsi Co., and Microsoft are safe stocks to invest in, and they would be correct. When looking at large and successful companies they consistently grow each year. So how do you tell if that company will continue to grow? Well there is no sure fire way to know that will continue to grow, or wont go bankrupt, but there are plenty of things to look at to give you a good understand of where the company stands in the terms of growth and stability. The first being the company’s financial ratios. Say you were interested in investing in Walmart. Obviously, Walmart is a very successful company that doesn’t show any signs that they are slowing down anytime soon, but lets say you want to be sure. The website www.morningstar.com is a great website to get financial ratios from. When we search Walmart we found several different ratios to use and compare to Walmart’s competitors. They have ratios all the way back to 2007, so you can use these ratios to monitor a companies growth. They even categorize the ratios to make it easier for investors.
Another great way of determining if a company will continue to grow is if they are evolving, adjusting, and expanding. Take Walmart as an example again. They realized they were losing market share to Amazon.com due to Amazon’s prime membership. The most attractive feature of Amazon Prime is their two day shipping. However, the membership costs $99 a year. This is where Walmart takes back their market share. Walmart will ship select products right to your door in just two days, just like Amazon. This is just one of the Walmart is evolving and continuing to grow. They show exceptional promise for investors.
I hope this weeks blog was helpful for you. As always, if you have any questions or comments please contact me or leave a comment! Until next time, happy investing!