Sunday, January 18, 2009

The Choice of Stocks (1)

The financial tsunami creates a chance to search for best-buy stocks.

There are several types of stocks that may become best-buy:
  1. The Basic Demand type - they are companies providing products or services required daily. No matter under what conditions, people still need to eat, drink, excrete, move, and sleep. In our life, we need basic food, water supplies, electricity, communication, transportation, and sewage treatment. We also need basic clothing and some other fundamental appliances. The companies that provide such basic needs will not have their business greatly declined. Their stocks, though, under extreme financial environment, may be under-valued.
  2. The Government Policy type - they are companies being benefited by the national policy for economic stimulation. Usually government will invest on infra-structures (both hard and soft) for improvement on competiveness. Government may also support some industries for capturing new market and expanding existing market shares.
  3. Survivor Type - they are the survivors of the affected industries. Due to the severe environment, many 0f their competitors are "phased out". Despite the contraction of the overall pie, the expansion of their shares may all too well offset it.
  4. New Star Type - they are new ideas that create new demands and have the potential to be the next stars.

Each of them have their own criteria of choices. I will continue to discuss abotu them at the following days.

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