It’s a question every investing newbie asks: How do you determine the best stocks to buy right now? As you look to start–or build–your portfolio, deciding what companies to invest in can be overwhelming.
That information overload can be one of the barriers to investing, especially for women. According to The 2023 State of Women survey from HerMoney Media and Principal Financial Group, just 22% of women consider themselves knowledgeable about investing compared to 46% of men. Even so, countless studies have shown that when investing, women achieve higher returns than men do.
Patty Klawonn is a member of InvestingFixx, HerMoney’s investing club for women (get your first month free here). Recently, she was looking to invest in a company, but wasn’t sure how to evaluate whether or not it was a good buy. At the advice of a friend, she went to the company’s website and investigated its financial history. “It was just pages and pages,” says Klawonn. “My head was spinning.”
I know what you’re thinking. There must be an easier–and more efficient–way to decide on the best stocks to buy right now. Luckily, according to Karen Finerman, co-founder of InvestingFixx, there is. Finerman co-founded the New York-based hedge fund Metropolitan Capital Advisors in 1992 and serves as its CEO. And, if you watch CNBC, you’ve probably seen her on Fast Money, where she’s served as a panelist since the show launched in 2007.
Finerman has a list of six questions every investor should ask as they decide the best stocks to buy right now. And, luckily for us, she shared her intel during a recent InvestingFixx session — and we HAD to pass it along 🙂 As you’ll read, Finerman’s criteria is often more conceptual and mathematical, which she says is usually best for guiding the decision-making process when evaluating investments.
Without further adieu, here are the top questions to tackle before you decide on the best stocks to buy right now:
1. IS THE BUSINESS GROWING?
First and foremost, you’ll want to get a handle on whether the business is growing. Let’s use Nvidia as an example, a company that designs graphics processing units, among other tech. Nvidia also is a major player in the artificial intelligence (AI) hardware and software space. It’s one of the picks in our InvestingFixx club and it’s seen tremendous growth in recent years. Nvidia has seen a near-unprecedented level of growth in the last few years, making it a solid pick.
2. IS THE INDUSTRY GROWING?
Next, take a look at whether the industry is growing to evaluate if it’s among the best stocks to buy right now. Again, back to our Nvidia example. The answer (again) is yes. The generative AI industry is expected to become a $1.3 trillion market by 2032.
3. WHAT IS THE COMPANY’S MARKET SHARE?
In other words, just how big of a player is the company in the market? While Nvidia is “undoubtedly number one” currently, things can change over time. “If I go back 20 years, Intel was ‘the’ chip,” Finerman points out.
4. WHAT ARE THE BARRIERS TO ENTRY?
In other words, how difficult is it for other companies to get into the business, and become a fierce competitor for your pick? “If we stick with this chip analogy, it’s difficult,” explains Finerman. “You need extremely expensive equipment that is very difficult to get, and you need big orders. You’ve got to have a lot of money to put up…you might operate at a loss for a long time.” In other words, Nvidia is almost in a class by itself.
On the other hand, for a company in the athletic apparel space, for example, there would be a much lower barrier to entry. The higher the barrier to entry, the less likely it is that the company will have competition, which can mean better, more stable returns on your investment.
5. WHAT’S THE MANAGEMENT LIKE?
“Sometimes it’s hard to know how good a management team is or isn’t, but management is super important to me,” says Finerman. One of the most important traits she looks for? Humility. “I love the CEO who is sort of what I call an under-promiser and over-deliverer. They don’t want to sell this company too hard. They don’t want to set expectations too high. They never want to disappoint, they always want to be credible and the way you remain credible is, you tell the truth.”
One example Finerman uses to illustrate humility in a management team involves Jamie Dimon, CEO of JPMorgan Chase & Co. “Someone asked [Dimon], ‘Are we going to see other banks with the problems you had?’ And he said, ‘You’re asking if they’re as stupid as we are? I can only speak for us. I don’t know.’”
6. WHAT’S THE BALANCE SHEET LOOK LIKE?
Essentially, what you’re asking is: Does the company you’re considering buying stock in have a lot of debt? “That’s a potential red flag…not always, just potentially,” cautions Finerman. “If they have a great balance sheet, that’s always a good thing.”
THE BOTTOM LINE
Before you make any type of investment, it’s critical that you do your homework on the best stocks to buy right now. These questions can be a great starting point for you to grow your portfolio or begin your investing journey. And, if you need a little extra boost, join us over at InvestingFixx. Our investing club for women meets every other Monday with Finerman and HerMoney CEO Jean Chatzky. It’s always a judgment-free zone, where you can ask anything about investing and wealth building, and we’ll be there to answer it all!
P.S., Your first month of membership is free!
MORE ON HERMONEY:
- When Should You Sell A Stock?
- Five Red Flags To Watch Out For Investing In Stocks
- What’s The Difference Between The Stock Market And The Economy?
SUBSCRIBE: Get our best money and life advice delivered to your inbox for FREE twice a week. Subscribe to HerMoney today!
