Mellody Hobson: Picking Stocks
Sep. 26, 2006 — -- Picking stocks can be a difficult job even for investment professionals. In her fourth installment on the growing trend of investment clubs, "Good Morning America's" personal finance expert offers a few tips on how to begin the process of picking a winner.
For starters, what details deserve the most attention to when choosing a stock? For those who are newer to investing, the key piece of advice is to "know what you own." More specifically, you should start by looking at companies who businesses you understand. One of the best ways to build a portfolio is to do so in the same way you would fill your shopping cart or select gifts for your child's birthday or for under the Christmas tree. Buy what you (and others) like and know.
With that in mind, here is Mellody's Shopping List -- some items to consider, not necessarily buy, when you're trying to build your portfolio.
Food:
Cereal Companies: Most everyone who has children relies on cereal for breakfast, not to mention the many "in-between" meals. A simple walk down your grocer's cereal aisle -- a whole aisle dedicated to it! -- reveals that you are probably not the only family in America that eats Cheerios, Corn Flakes or Raisin Bran.
Spices and Condiments: Everyone who cooks flavors their food. As such, spices are the one commodity that I would recommend people consider adding to their portfolios. In a similar vein, consider companies that make jelly, ketchup, mustard -- also staples for sandwiches and many items that Americans consume every single day, no matter if the economy is flourishing or lagging. It is important to scan the aisle for the product with the greatest presence and shelf space -- an item that is not being swallowed by independent, smaller competitors.
Clothing:
Not necessarily the hot, must-have, back-to-school item, but again, the staples that every American family has in the wardrobe. Ask yourself what item you always end up buying year after year.
Similarly, are there certain brands that are better than others, that stand up to rough usage and that even become hand-me-down's -- those items may be even better choices. Some suggestions: jeans, underwear, wool hats and gloves.
Pharmaceuticals:
Flu season is right around the corner, so if you are like many Americans, you are likely going to fill your medicine cabinet with all types of remedies. Additionally, more than 23 million American over the age of 65 take between one and six prescription medicines per day. That makes for a pretty big market.
