Question

Briefly define a good company and a good stock, differentiate them from each other and describe how they would be applied for an individual investor.

Answer 1

A good company can be briefly defined as a company which have the following features :

• it have a well-defined strategy.
• a company having well experienced and qualified management with strong leadership qualities.
• company which know its competitive strengths.
• a company which have at ethical environment and good corporate culture.

A good stock can be defined as a stock which of the following features :

• a stock having a good rate of return.
• a stock having high intrinsic value.
• a stock having low leverage.

For an individual investor good stock is one which have more intrinsic value as compared to its fair value in the market. As this is an undervalued stocks which in future is expected to raise in market value and will be profitable for the investor if he buys stock in current period.