With the Olympics starting this Friday, fans are getting excited to watch athletes from their country compete in a variety of sports on the world's biggest stage.
Millions will watch the 100-meter dash, pole vault, javelin, shot put, and many others. Meanwhile, many will want to watch the decathlon where athletes compete over two days in ten events in a contest that proves who is the most well-rounded athlete. However, the winner isn’t necessarily always the one who is a jack of all trades master of none, instead competitors can often dominate a select few events and win the overall contest by holding steady on the others.
What does This Have to do With Investing?
Well, investors are often looking for the best overall investment that is undervalued by the market, highly rated by analysts, strong fundamentally, and has high market sentiment currently. However, this isn’t always the right approach for traders.
First, it can be hard to find stocks that fit all of these measurables.
Second, individuals should be identifying which criteria are most important for an investment to help them reach their goals. Just like a decathlete doesn’t need to be the best at every single event, a stock can tick a few key boxes and be a smart investment based on the individual’s goals.
Almost no athlete starts as a decathlete. Many end up there after being almost, but not quite good enough at a single event. You can see on this chart that decathletes aren't setting world records, but and they tend to be closer to the elite level at some event's than others. (Has any great shot-putter ever been able to pole vault?) This mean athletes focus on a few events and then try to not to give up too many points on the others.
Events for a Decathlon Stock
Similarly, there are many different measurables investors can pour over when making an investment decision but it mainly boils down to technical analysis and fundamental analysis. You can consider sub-categories in technical analysis like market sentiment. While on the fundamental side, you can look at valuation and analysts rankings. Depending on the type of investor, traders will pay closer attention to specific factors.
A day trader may focus on technical analysis and especially sentiment for example to determine which way he or she believes the stock will move next. Fundamentals and analyst rankings are of little importance when making very short-term trades because a company's long-term future doesn't really matter.
Meanwhile, a more "traditional" investor who is making long-term bets and wants less risky assets that are built on a strong underlying business will be more geared towards fundamentals, valuations, and analysts scores. These traders are not trying to profit from short term price movement and instead want to build a portfolio of stocks that are poised to continue growing with a strong business model and are priced fairly according to its fundamentals. Additionally, analysts' rankings of these stocks can play a large role as they analyze a company’s balance sheet and outlook going forward so the everyday investor doesn’t have to go through every excruciating detail of an earnings report.
Wrapping Up
Each investor’s goals are different and some may want to have a mix of long-term investments that Warren Buffet approves along with a few riskier bets that belong on r/wallstreetbets. InvestorsObserver offers investors an easy view into how stocks rank against each other with its proprietary scoring system that allows investors to quickly see how a stock ranks in each category. Traders can analyze how each stock score contributes to an overall rank and its prowess in a decathlon style event. Finding a stock that checks every single box is great but sometimes it just needs to hit the right few to be a great investment for you.
