Company Details: Context Matters 🏢
Numbers don't tell the whole story. Understanding the business provides crucial context.
The Company Description
Every stock page includes a business description:
"Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. The company offers iPhone, Mac, iPad, and wearables including Apple Watch and AirPods..."
What to Look For
- What they sell — Products and services
- Who they serve — Customer base
- Where they operate — Geographic reach
- How they make money — Revenue sources
The Elevator Pitch
The company description is like an elevator pitch. In 30 seconds, you should understand:
- What business they're in
- Why customers buy from them
- How they generate revenue
If you can't explain it simply, you might not understand it well enough to invest.
Key Business Metrics
Beyond scores, look at:
Valuation Metrics
| Metric | What It Shows |
|---|---|
| P/E Ratio | Price relative to earnings |
| P/B Ratio | Price relative to book value |
| P/S Ratio | Price relative to sales |
| Dividend Yield | Income return |
Size Metrics
| Metric | What It Shows |
|---|---|
| Market Cap | Total company value |
| Revenue | Annual sales |
| Employees | Company size |
Performance Metrics
| Metric | What It Shows |
|---|---|
| 52-Week Range | Price volatility |
| Beta | Market sensitivity |
| Volume | Trading activity |
Key Takeaways
- Understand what the company actually does
- Check key metrics for context
- Know the sector and industry
- Consider geographic exposure
Sector and Industry Context
Why Sector Matters
Different sectors have different:
- Growth rates
- Margin profiles
- Valuation norms
- Risk characteristics
The 11 GICS Sectors
| Sector | Characteristics |
|---|---|
| Technology | High growth, high valuations |
| Healthcare | Defensive, innovation-driven |
| Financials | Interest rate sensitive |
| Consumer Discretionary | Economic cycle sensitive |
| Consumer Staples | Defensive, stable |
| Industrials | Economic cycle sensitive |
| Energy | Commodity price driven |
| Materials | Commodity price driven |
| Utilities | Defensive, income-focused |
| Real Estate | Interest rate sensitive |
| Communication Services | Mixed (media + telecom) |
Questions to Ask
Before investing, you should be able to answer:
About the Business
- What does this company sell?
- Who are their customers?
- Who are their competitors?
- What's their competitive advantage?
About the Financials
- How do they make money?
- Are profits growing?
- Is the balance sheet healthy?
- Do they pay dividends?
About the Future
- What could go right?
- What could go wrong?
- Is the industry growing or shrinking?
- Are there regulatory risks?
The Buffett Test
Warren Buffett only invests in businesses he understands. Ask yourself:
- Can I explain this business to a 10-year-old?
- Do I understand how they'll make money in 10 years?
- Would I be comfortable owning this if the market closed for 5 years?
If not, maybe it's not for you.
Red Flags in Company Details
🚩 Overly complex business — If you can't understand it, be cautious
🚩 Concentrated revenue — Too dependent on one customer or product
🚩 Geographic risk — Heavy exposure to unstable regions
🚩 Regulatory uncertainty — Business model under threat
🚩 Declining industry — Swimming against the tide
Context Traps
- Investing in businesses you don't understand
- Ignoring industry dynamics
- Not checking geographic exposure
- Assuming past success guarantees future success
Next up: The AI Investment Thesis—getting the full story.