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4. Analyzing Company Fundamentals > Compare Several Competitors to Identify the...

Compare Several Competitors to Identify the Strongest Candidate

A beauty pageant with only one contestant isn’t likely to find the most talented or congenial individual. Likewise with stocks—before you invest, judge your candidate against several of its peers.

Long-term investors often approach their stock selections with the mantra, “Invest in the best.” High-quality, well-managed companies will frequently be the best buy-and-hold investments in your portfolio. By comparing several competitors in the same industry, you can identify the strongest contenders. Another reason to pay attention to a company’s competition is that many financial ratios vary based on the characteristics of each industry. By comparing a company’s financial ratios to those of the competition, you can identify the company’s strengths and weaknesses, and perhaps find a better prospect for your portfolio.


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