Why Batswana lost money investing in shares,

Good day, I want to give you 5 things to look when buying a share of a company,

1. How they generate revenue: What problem they solve and their value

2. The ability to generate future cash flow: Will the company have more money coming in the business in the future or not

3. Competition: Does this business have too much alternative competition that can offer the same services or products

4. Balance sheets and financial health: Does the company have good financial track record

5. Team: Can the team carry the company to the desired future and profitability

What you get from this article is the keys to look for in a company and few companies in BSE that may exhibit that.

We will learn how fundamentalists determine which stock to buy instead of technical analysts do since that’s more for short term trading.

How does that company make money

You need to know how that company makes money, what industry is it in, what do they make, what is their product, what is their service. In my opinion I invest in companies I like and use their service, it’s easier for me when I’m learning about them and how they run becomes enjoyable for me to find out.

How do they make their revenue, that is very important.

Future positive cashflow generation

Is that company cable of generating future cash flow, a company you invest in must be alive in the future, I think that’s something a lot of us investor beginners forget, a month ago when I realised this I started to see the mistakes I made. This is key, can the company you’re investing in continue increasing its earnings, profits and cash flow?

Most Batswana lost money investing in companies that have no future, especially mineral companies thinking that they will gain but lost all.

Note of course there are other things to consider like discounted cash flow since you will make lower than your high expectations but as long as if it’s positive

But how do we know it will generate future positive cashflow? On to the next point.

Brand

It’s quite funny to me that branding is often times confused with marketing. The two are not the same, marketing involves doing something to attract customers to your solution in the form of a product or service, but brand is who you are as a company to the customers and what you’re known for.

Simply put brand is who you [identity] are and marketing is what you do.

Brand is such a great advantage and should be seen as something important in investing. It’s the quality or lack of quality the company is known for. Is this a company known for producing high end products and services or is it known for cheap products that break easily?

Brand is that intangible part of the company that makes people just automatically come to it. Why do more people want to buy an Iphone compared to an Android? It’s because of Iphone’s quality in pictures and videos. You see it’s not just about being cool or relevant in people’s eyes when it comes to branding, it’s about creating products that are very valuable, high quality and not easy to replicate or at least when they are replicated the alternative is cheap and does not compare in quality.

And because of that this company can charge premium services due to their innovation and doesn’t compete on price.

A good example would be KFC’s chicken nuggets compare that to maybe Choppies’ CFC nuggets. You buy 6 nuggets at P34.90 while you can get 18 Choppies CFC nuggets at P12.50.

Why because of the brand and the fact that they introduced it to the Botswana market, not that they are the ones invented it, it was invented by someone called Baker in 1963 and later patented by McDonald in 1979. Other local stores just copied the recipe selling it cheaper for convenience.

Better Alternative competition

Too much competition is bad for a company you invest in. It won’t yield as much profits or cash flow as investors need, especially if the alternative has an innovative solutions. If a company you’re investing in is not innovating a solution to a problem but it’s nearest competitor is, you are losing money, it may take years but eventually you will see it. Let me give you an example

For instance the taxi service in Botswana, what interrupted it is InDrive now we have Bolt. This tech company made many taxi drivers mad last year because a lot of Batswana were starting to use them instead of the standard taxi business. Even though things look cool now but the taxi industry has become too saturated and the traditional taxi guys will lose more and more market share because of these tech companies. The thing about innovation is that it does not necessarily kill a market completely but it definitely takes huge profits from the traditional providers of the industry.

We don’t have a taxi share company to invest in, but let’s take an example of our neighbour South Africa, right now it would not be a great time to invest in Dstv shares [MCG] in the JSE because of Netflix and Tik Tok because these two are taking all the market share.

In Botswana, FNB does really well at innovation with their dedication to make banking efficient and convenient it leads the way and continually makes profit.

Balance sheet and financials

This is such an important part in any company, a company must have enough assets to cover its short term liabilities. A balance sheet may be hard to read, but there are websites that help you to easily read a company’s financials easy and show you if it’s healthy or not, such as Simplywallst. With Simplywallst you can add a company to watchlist to study it. You can see its financials, its past performance, important metrics like P/E ratio and ROI, ROIC.

Take time to learn these things they’re very important. You can also check out a company’s reports from their website.

Team work

During my 3rd year as a University of Botswana student I witnessed 2 parallel things. One semester I was with a team that destroyed a straightforward and great idea making it below average in execution then the following semester I joined a team that took an idea that seemed too big to execute and make it happen in the most exciting and beautiful way possible.

That taught me the importance of having a great team, if you have a team full of mediocre people who are not hungry to change the world or change society but only interested in payday then your idea is doomed, but if your team is eager to change the world then you are about to have the adventure of a lifetime.

The company you buy shares in should have the best team, check their team, do the people running it have a good track record of delivering results? Can they innovate and bring new solutions to the company? If they do, then your shares of the company will do well.

You can find who’s in the team from the company from a company’s website.

Conclusion

The most important thing is the company’s ability to endure the future and make profits and positive cashflow, that’s the essence of this article.