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Monday, 7 April, 2008

What kind of companies to put money in?

I have been thinking what kind of companies should I put my money in. Here is a small checklist...

1. Should have a product that caters to a large chunk of population. (Why not niche markets? Afterall, a brand can command a premium in niche markets?)

2. The market should be growing. (For obvious reasons)

3. The market should not be crowded with competition. At max three players in the market.

4. Barriers to entry should be high. The company should not be susceptible to competition from fly-by-night operators.

5. It should have a huge brand name. I dont know how to quantify brand names but it should be easily recognizable and trusted by its customers.

Obviously price is still the most important factor in the buy decision.

Need to put a lot of thought before I can finalize the checklist. Can anyone point out flaws?


knowitall said...

Investing in companies that are likely to see massive demographic changes...might interest you. Companies that can benefit from the same could Nestle, HLL, GSK-Cons..etc.

Anonymous said...

Dabur and Marico


Utti said...


stable cash flows, at times market does not like stable cash flows when it is looking only for euphoria (for e.g. Mr market in India for the last couple of years)

Deep value plays , though i am not sure about the triggers that will lead to value unlocking, i believe in stuff happens

Putting in something after a long time - SA

The maturing process said...

1. Why should the product cater to large chunk of population-absolutely no reason for that rule.
2. Why can't a company grow its sales and profit, especially profit, in a shrinking market if its the best producer. There would also come a point when it'd be the monopoly with pots of cash.
3. Markets should not be crowded-totally agree with the people who give you the examples of HLL and Nestle.
4. Same as above.
5. Must've strong brands. . . . . . . . . Would never invest in Infosys.

So no rules huh. . . . . Maybe you should confine them to left brain thingie like accounts and ratios.


I like investing in simple companies that are easy to understand.