| Strong Portfolio | | | | portfolio. An extended history of profitability led |
| The idea of building a strong portfolio should be the | | | | many investors and analysts to believe that this |
| central focus for any investor looking for successful | | | | business would always be a strong investment. The |
| long term investing results in the stock market. While | | | | past, however, is of little value in projecting future |
| it is true that a trader can find an occasional gem | | | | cash flows. One way to evaluate whether a |
| with stock buying tips or a hunch, the majority of | | | | company can sustain its cash flows is to look at its |
| good investments will be the result of doing the dirty | | | | earnings estimates. A company that is struggling to |
| work. This work will help a successful investor to | | | | make its numbers might not prove to be a successful |
| discover the strengths and weaknesses of a | | | | investment and its purchase might not help to make |
| company, as well as helping to understand the | | | | a strong portfolio. |
| business economics and market position of the | | | | How costly is a business to operate? |
| company. Such research of a company would fall in | | | | For a strong portfolio, it is wise to consider that |
| the category of fundamental analysis and is important | | | | some companies need a lot of money to make their |
| to making a good decision on the purchase of a | | | | profits, while others can operate successfully on very |
| companys shares and to building the strong portfolio | | | | little revenue. A utility company needs billions of |
| that you need to succeed in the stock market. | | | | dollars each time it opens a new power plant, yet an |
| | | | Internet company can operate on a small amount of |
| A trader cant really add a company to a strong | | | | ad revenue while it develops its product. The less |
| portfolio unless he or she knows how the company is | | | | money it takes for a business to survive, the more |
| generating its cash. This is critical and needs to be | | | | appealing it will be for someone investing in the stock |
| specific and void of assumptions. Papa Johns Pizza is | | | | market and the more desirable it is to give investors |
| a perfect example of such a need for understanding | | | | the advice to add it to their strong portfolio. |
| cash flow. Millions of people recognize the brand for | | | | Is the company managed in a shareholder-friendly |
| Papa Johns; its easy to assume that the company | | | | manner? |
| makes their money from selling pizzas. While Papa | | | | The management team and its attitude towards the |
| Johns does make pizzas, many of the actual stores | | | | shareholders are extremely important both in the |
| are franchises, separately owned and making | | | | companys success and in creating a strong portfolio. |
| products according to the ingredients and recipes of | | | | A company that looks at its own investment |
| the parent company. In other words, Papa Johns | | | | philosophy and investment options, such as |
| creates the pizza and other products that its | | | | repurchasing shares when the stock price has fallen |
| franchises make. After making this connection, it is | | | | rather than invest in another company is more likely |
| easy to see how important the relationship between | | | | to create wealth than a one only looking to build the |
| Papa Johns and its franchises is both to the | | | | company. Reading a companys actions before you |
| companys value in the stock market and to a strong | | | | buy can help make a strong portfolio. |
| portfolio. | | | | Is the price attractive? |
| How much cash does the company make and how | | | | Simply put, price is the single most important technical |
| quickly? | | | | analysis tool. The most common metrics for stock |
| Because of the time value of money, a company | | | | technical analysis are found because of the share |
| that makes a million dollars today is worth more than | | | | price. A $20 per share company that earns $6 per |
| a company that makes two million over the next | | | | share has a yield of 30%, but a $100 per share stock |
| twenty years. Making such connections between | | | | that returns the same $6 only turned a 6% yield, |
| cash flow and time is critical to implementing | | | | hardly anything that will excite investors or cause a |
| successful stock market strategies. | | | | company to be included in a strong portfolio. |
| Can the company continue to maintain its cash | | | | The best investment advice happens to also help to |
| flows? | | | | make a strong portfolio; follow the money flow. If a |
| At one time the American steel industry was | | | | company is successful at making and sharing its |
| considered a blue chip stock in a strong portfolio and | | | | money, it will be a company that has strong |
| countless analysts advised adding it to a stock | | | | investment potential. |