How I Pick Stocks

  1. I have to be able to explain in one sentence why I own the stock.

  2. I plan to hold it forever (although that usually does not happen).

  3. If it does not pay a dividend, there has to be a VERY good reason to buy the stock. Read this excellent article on dividend investing to learn more.

  4. I prefer companies with recurring revenues (such as pharmaceuticals, Starbucks) as opposed to manufacturers and companies where products are purchased sporadically.

  5. I favor companies that take advantage of a major demographic trend (such as Baby Boomers).

  6. In spite of spending most of my life in technology, I don't purchase very many technology stocks. I own a smattering (Apple, Google), but they tend to be underweighted. Technology moves too quickly for me and owning a technology stock might violate my first rule above.