Know the business you invest in

Why start with the business?

A share is a piece of a company, as What is a stock? explains. If you cannot say what the company does in one or two plain sentences, you do not yet know what you would own. Price charts, tips and a logo do not fill that gap.

What does the company sell?

Ask what a customer actually receives. For a telecoms company such as MTN Ghana, a customer receives airtime, data and related services. For Fan Milk, a customer receives something cold to eat or drink. For a bank, a customer receives accounts, loans and other financial services. If the answer is "it is on the stock exchange", you have described the market, not the business.

Who pays, and how often?

A business with millions of people paying a small amount every week is different from a business with a few large contracts. Neither one is automatically better. You want to know where the money comes from and what would happen if those customers stopped. A shop you already use can still be a poor share. Familiarity is not research.

Has it been earning more than it spends?

Profit is what is left after the costs of running the business. A company can be well known and still lose money. Read a filing, not a memory. The company pages show figures from Ghana Stock Exchange filings, with each filing linked.

One profitable year is not a pattern. Compare a few years, and if a figure is missing, do not fill the gap with a guess.

What could make customers leave?

Competition, a broken service, a price people will not pay, a new rule or a cost the company cannot control. Fuel costs matter differently to an oil marketer than to a dairy. Write down one thing that would tell you the business was getting worse. If you cannot name that thing, you are not ready to judge the share.

How would you know if you were wrong?

Decide, before any purchase, what you would need to see to change your mind. A falling price by itself is not always that signal, and a rising price is not proof you were right. The point is to do the thinking yourself.

If someone gives you a tip, ask them these same questions. Notice whether the answers are about the business or about the price going up.

Where can you read about the business?

• Yanci company pages, built from Ghana Stock Exchange filings.
• Ghana Stock Exchange, for the filings and the list of dealing members.
• The company's own annual report, when you want the words around the numbers. Read the date on the cover.