newbie question

[fireman664]

I know nothing about the market (and I mean nothing)....but i was curious if it would be profitable to buy stocks from the companies who's products I notice, or think will become hot. An example would be about a year ago I thought Under Armour (the tight fitting football/workout gear) would be a big hit. Is this "eye to the street" a profitable way to go?

[FredJones888]

Picking a stock because of their new product and winning can be like hitting a flush draw on the river when you started with garbage, it feels good but its luck not brains.

[BadBoyBenny]

That might be a good reason to start researching and investigating a company. I think picking companies with products you like isn't a bad idea if everything else is in order also. Its good to own companies you believe in. But don't invest in anything without considering valuation, management, risk, competition, competitive advantage, etc.

If you truly know nothing about the market you are probably better off buying an index of ETF than picking stocks at all.

[BradleyT]

Companies that have a strong product will run up for many years. You don't have to get in on the bottom to make a profit. They might have the greatest product in the world but is management capable of making money with that product?

You'd be suprised how many "great product" companies can't make a profit for whatever reason.

Take a look at Microsoft: you didn't have to get in on the bottom to make a profit with them.
http://finance.yahoo.com/q/bc?t=my&s=MSFT&l=on&z=l&q=l&c=&c=%5EIXIC

[Redsox]

As someone who works as a securities trader on the floor of an organized exchange, it worries me a little bit when I see people trying to "get their feet wet" by picking a few stocks to put their money into. When getting started, invest your money in large, diverse mutual fund holdings (for instance through your 401 K @ work), or buy ETFs (exchange traded funds). These funds (listed on the AMEX as SPY, DIA, QQQ) trade just like stock but "track" the movements of the underlying market perfectly. You'll find that your returns will be less volatile (although your upside will be certainly less than if you picked a single stock and it went to the moon). Professional money managers don't beat the S & P 500 returns with any regularity (last time I checked, only 25 % of all fund managers beat the returns of the S & P with any regularity). Invest wisely, diversly, and for the long term, and I think that you'll save yourself a lot of headaches.

-Eric

[MaxPower]

Not really. It is a good way to identify possible investments, but I wouldn't buy a stock just based on that.

In one of Peter Lynch's books he talks about this and how to follow up on these ideas.