How to pick stock (Part 17)

Rule #2: Buy a stock that worth to be hold for long term

Based on the passed 3-4 years investment experience, there is about minority of stocks which is worth to be hold for long term given the several reasons:

1) The company is currently in the growing stage 

The company is actually in the growing industry where the peers are actually also enjoying the benefit of growth. The profit margin is increasing, and they achieve a better asset turnover give n the increase of revenue over the asset that they employed. 

2) The company has a good management

The company has a good management where they do some homeworks on: 

- Research & Developement => innovation and creativity is a competitive advantage over a smaller size company where they cannot achieve the economy of scale as compared with other bigger size company. What they did was actually very simple, to engage with the research and development activities, such as to create a new product / services so that they can enjoy the growth in another new area, or they can actually go and do some researches on how to reduce the man cost on the business process, such as to streamline the business process by reducing the unneccesary recurring costs. 

3) The company is in a good industry

- The company is in a good (meaning is in a sustainable growth) industry. The industry analysis that we normally do is to try to find out a less competitor environment. For example, there are only three main telco players in both Malaysia and Singapore countries. What the peers can do were to actually concentrate on keeping the existing cutomers. This is a less competitive environment, where they normally can achieve a higher profit margin. The more higher margin a company has, the more the company can survive during the downside of the eonomy circle.

To be continued...