What makes a company good enough to invest in its stock?

I was asked this question the other day. 

"What makes a company good enough to invest in its stock?"

For me, it depends on what I want from the stock. 

Usually it’s one of three things: 1) Income 2) Growth 3) Speculation.

A company like Proctor and Gamble (PG) is a blue chip stock and pays a nice dividend. While the company might or might not continue to grow, I only care about getting that juicy dividend payment each quarter. I consider PG in income stock and I do not expect the stock price to move dramatically. I want to get paid for owning the stock.

On the other hand, a company like Amazon (AMZN) is a growth stock. They do not pay a dividend nor do I expect them to do so anytime soon. Rather, the company reinvests money back into their business and looks to expand by developing new technologies, by acquisitions, or by other means to grow into an even larger company. Since there is no income being generated from this stock, I want the stock to go up in price.

Finally, there are stocks that are fully speculative, meaning extremely risky. These types of companies can either go to the moon in stock price or go out of business. These days, there are many hemp stocks that are trading for pennies a share. Who knows if these companies will be successful or if they will fail? If I read up about a speculative company and I believe it has a decent chance of surviving and thriving, I might make a small investment in the company. This is money I expect to lose, but what if the company makes it? I want the company to become the next Apple, Google, or Amazon and that’s good enough for me.

Full disclosure: I own Apple and Proctor&Gamble. Note: this is not a recommendation in any way, shape or form of buying any stock. 


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