One of my biggest rules for stock investing is to invest in what I know. If I don’t understand how a company makes money, I don’t want to invest in it. In high school, I bought a stock because some analyst rated it a 10. They make cast resin transformers in China. Do you know what that means? Probably not, and to this day I still do not. And when that stock tanked 70% over the course of a few years, I decided to hold on in a hopes that it would go back up. After waiting about 7 years, it never came back, and analysts have never rated it nearly as high since. There are multiple morals to this story, including checking the financials of a company before investing in it, one of them was to invest in what I know.
I have found some of my greatest investments just by thinking about where I eat my meals, what type of car I drive, what type of clothes I wear, where I drink my coffee, what type of phone do I own, etc. But after thinking about hundreds of stock investments and checking their financials, I ran out of ideas. So what did I do? I took a drive over to the local mall with my girlfriend and just people watched. Somewhat creepy, I know, but it proved to be a good strategy. We checked people’s shoes (Nikes, Adidas, New Balance, Vans, etc.), tallied the number of different purse designers people were carrying (Coach, Kate Spade, Michael Kohrs, etc.), looked at different eye-wear companies (Ray Bans being by far the greatest amount), and noticed a lot of Starbucks in hand. Notice that all these groups have fantastic brands. And as if it weren’t obvious to you by now, brands sell and have a huge consumer monopoly. These are all great branded companies whose financials deserve a look into.
After sitting for an hour, we grew restless. We took a walk around the mall to see where most people were located. A few brands that were brought to my attention were Buffalo Wild Wings and Ulta, both of which are large growers and are expanding pretty rapidly. Furthermore, Apple had more people than any other store at the mall. That one should have been an obvious to me.
But the most important aspect of a mall to know about is that generally the most profitable stores are on the second store. The reason for this is because they want you to pass by numerous other not-quite-as-profitable stores so you may be enticed to buy things there as well. This is not a guarantee (i.e. Apple, who earns more money per square foot than any other company in the world) is located on the first floor. But as a general rule, look to invest in companies on the second floor. They’re generally more profitable.
My last bit of advice is to look for top brand companies, but also make sure to check the financials of the company before investing. By not checking the financials, you’re taking a huge uncalculated risk. Best of luck looking for stocks at the mall! I'm sure you will find some gems before Wall Street does!
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