You Have The Ultimate Say: Analysis Guidelines That Helps You Determine The Best For Your Investment Portfolio

Guidelines:
You do not have to be a professional to understand that if you have a portfolio, you are investing in companies or the government. Additionally, if you invest your hard earned money, you should have a say to where you allocate it. This is important to you, because you have the right to make proper decisions on how to better your economic situation.

There are a myriad of financial and economic analyses. Ultimately, that is what allows finance and economics to not solely be a science, but an art. For instance, two people may want to valuate a company. One person may try to discount cash flows by a certain growth rate to figure out a valuation while someone else, will decide to look at operating profits, the mission, and value objectives. Nevertheless, consumers have different tastes to risk, different reactions to returns, and different objectives in their strategy.

Being finance professionals, we dedicate much of our time looking at companies that promote consistent growth and value. We (as research partners), have created simple guidelines to analyze companies relative to the economy (which ultimately affects our investment decisions and case studies). We wanted to share them:

1. Analyze businesses by its “foundational platform” through their value and mission objectives. The merit of a business lies within its fundamental products, services, and goals. If this aspect fails to show quality, then the overall assessment fails.
2. Ensure that practices and strategies within the company are relevant to the ideology of “being able to sustain competitive advantages”. Sustainability targets the efficiencies, the effectiveness, and the overall productivity of a company (long-term). For instance, it may be a company that offers an exclusive product or a company with a rare price advantage.  
3. Proxy and measure the macro-economy. The overall macro-growth and fundamentals are critical. For instance, effects on percentage changes due to policies of GDP, unemployment, and inflation are critical to analyze.   
4. It may not be on top of the list, but the financial data and reports are valuable. It is a story detailing the success of a company by the numbers. If guidelines 1, 2, and 3 are promising, then 4 would “tell a growing and profitable story”. Ultimately, this can be done by researching returns on the equity, the operating cash flows, the overall cost of capital, and the required returns of the company relative to market returns.

Takeaway:
 It is a balance of understanding the quality of the business by first, the value, and then, the quantitative performance. Both are indispensable to the overall analysis. However, the art of these disciplines come from the personal conclusions drawn by the individual. What we may consider great may be mediocre for someone else (and vice versa).  But it is up to you to make the most of your hard earned money and economic situation. ​