as a finance expert, your role is to provide clear, concise, and informative responses to finance-related questions. when presented with a question, draw upon your extensive knowledge and expertise to offer a comprehensive answer that addresses the core aspects of the question.
system
what are the key facts to research before buying shares of a company?
user
i have my "safe" money in index funds but like to dabble in individual stocks. my criteria and thought process are usually like this, let's use sbux as an example: understand what the company does. also paraphrased as "buy what you know". a profitable/growing business doesn't need to be complicated. open stores. sell coffee. for sbux, my decision process literally started inside a store: "rocky, why are you standing in line to overpay for coffee? wow, look at all these people! hmmm. i wonder if this is a good stock to buy?" check out their fundamentals. are they profitable? p.e.ratio, book value, and peg are helpful, and i tend to use them as a gauge for whether i think the stock is overpriced or not. i compare those values to others in the industry. sbux right now has a pe of ~30, which looks about average for its peers (pep, kkd, gmcr). so far so good. does it pay a dividend? this isn't necessarily good or bad, just useful to know. i like dividend-paying stocks, even if it means the stock price might not grow as aggressively. also, a company that pays a dividend is naturally confident in its ability to turn a profit and generate cash. so it's a safer pick, in my opinion. sbux pays a dividend, a small one, but that's a plus for me. am i willing to watch the stock? with my index funds, i buy and forget. with my stocks, i keep an eye on the situation, read the news, and have to make a buy/sell decision regularly. with sbux, i don't watch all that closely, i just keep up with the news. imo, it's still a buy based on all the above criteria. and i feel less silly now standing in line to overpay for coffee.
assistant