Buying the best shares currently available could prove to be a sound move. They may be better able to withstand a period of weak economic growth. They could also deliver higher returns as the world economy’s performance improves.
Therefore, spending time analysing industry growth prospects, assessing company reports and valuing businesses could be a sound move. It may mean that you purchase the most attractive investment opportunities that can make a major impact on your long-term financial prospects.
Analysing industry prospects to find the best shares
The best shares to buy today may not necessarily have the brightest near-term outlooks. For example, they may face a tough set of trading conditions as a result of downbeat consumer sentiment or disruption caused by lockdown measures implemented due to coronavirus.
However, they could have improving outlooks over the long run that make them attractive investment opportunities. As such, analysing the long-term prospects for a wide range of sectors may help you to deduce where the best buying opportunities may be located. This may lead you to focus your efforts on a smaller number of industries. Especially those where a mix of short-term uncertainty and long-term growth potential may provide a larger number of attractive stocks to buy today.
Using annual reports to assess a company’s prospects
As well as analysing industries to find the best shares, assessing annual reports and recent company updates could be a shrewd move. They provide detailed information on the financial position of a business. This could be very useful in the current economic climate, since slowing sales growth may mean businesses with solid balance sheets have a higher chance of surviving a difficult set of trading conditions.
Furthermore, annual reports provide information regarding a company’s strategy. This may help you to determine whether it has the right plan to adapt to a fast-changing economic environment. Or if its business model is outdated. Through reading management commentary and viewpoints, you can build a picture as to how strong a company’s position may be over the long run. This may have a significant impact on its financial performance and investment gains.
Of course, buying the best shares at the wrong price may not lead to impressive returns for investors. Therefore, it’s important to try to estimate the value of a company prior to purchase. If it’s trading at a higher price than it’s worth, it may be a good idea to look elsewhere. Or wait until it trades at a lower price.
Fortunately for new investors, many high-quality companies have not yet recovered from the stock market crash. Therefore, good value stocks are likely to be on offer at the present time. They could have a positive impact on your financial prospects in the coming years.
Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.