If one plans to make some long term investment in certain company’s stock or wants to make a serious career move, here is a checklist of few common factors :
Factor 1 :Is it really difficult to replace company’s products ?
( examples :Google,Facebook, Nestle, 3M )
Factor 2: Is this business getting stronger or weaker ?
Is it growing ?
How long is the road (scalable)?
(example : pager business went down after the arrival of cellular phones ,similarly watch-makers & camera producers are struggling after these two features were added in mobile -phone)
Factor 3: What is the next level of this business ?
Is there enough opportunity in its current market ?
If yes , what company is doing to en-cash the rest of the market opportunity !
If no, what diversification plans are underway !
Factor 4 : Is the business differentiated ?
How company is different from others in same segment ?
Why customers would stick to it in long -run ?
What makes it better than competitors?
Example : Titan – trust on purity of its gold-offering
Factor 5 : Management Quality
Whether management is capable enough !
Whether it is honest !
What is the management track record !
The key important parameters can be :
i)Passion ii) Integrity
iii) Capability iv) Scalability
Factor 6 : Debt on the books
Many a times companies go bankrupt as they bite more than what they can chew ! Interest costs kill them ! They take loan for mega-projects which have a long gestation period to give returns and when the project is ready the market disappears , leaving the company with huge leverage on its books !
Examples : Huge loan taken by power sector, real-estate companies in last decade led to their failure in current decade.
Factor 7 : Regulatory Issues ?
Certain businesses get affected by regulatory related changes , their whole business model need to change to follow new laws and rules and many a times ,many companies fail to change or the business -model is not flexible enough to change according to changing environment !
Example :Vodafone in India
Factor 8 : Agility
Company having enough history to reflect how it handled difficult situations in the past !
Factor 9 : Focus on Innovation, Long Term Vision
Is company spending enough time & money to improvise its offerings !
Is company focusing on changing customer and market behaviour !
Factor 10 – Care for stake-holders
Does company go extra mile to serve its customers ?
Does company takes extra care of its employees ?
Does company take care of its minority share-holders ?
Is it transparent for everyone involved ?