How to Invest in Companies That Are Part of a Whole

TL;DR

When evaluating companies based on their products, it is important to understand the company's overall revenue, the percentage of revenue from the specific product, and the potential growth of the product.

Transcript

this one was submitted by Zach kanaka at Zach kanaka on Twitter and Zach one of our better looking if I may say so sir one of our better looking listeners of this podcast thank you very much for sending in a video question that we just saw four off of our phone but you asked a great question Zach you basically said you know how do you evaluate comp... Read More

Key Insights

• 👯 Many people overlook the importance of understanding the company behind a product they enjoy.
• ❓ Evaluating the percentage of revenue from a specific product provides insights into its significance to a company.
• 👶 Assessing the potential growth of a new product helps determine its impact on the company.
• 💁 Sources such as 10-K filings and business journalism can provide information on a company's revenue mix.
• ⚾ Evaluating companies based on products involves considering both the current and future potential of the product.
• 🧑‍🏭 Factors such as market size and competition should also be considered when evaluating a product's impact.
• ❓ It is important to consider the overall revenue of a company when evaluating the significance of a product.
• 💁 The Motley Fool advises against making investment decisions solely based on information from the podcast.

Questions & Answers

Q: How should I evaluate a company when I only know about one of its products?

Evaluating a company involves considering the company behind the product, the percentage of total revenue related to the product, and the potential growth of the product.

Q: What sources can I use to find out the revenue mix of a company?

You can read the company's 10-K, which is a public disclosure document available online, or rely on business journalism that breaks down businesses and provides relevant information.

Q: How important is it to assess the potential growth of a new product?

Assessing the potential growth of a new product is crucial as it determines the significance it can have on a company's overall success and future prospects.

Q: Can you provide an example of evaluating a specific product's impact on a company?

Take the example of YouTube Red, which offers a paid service making it a competitor to Netflix. Understanding how big this new service could become is an important aspect to evaluate for the parent company, Google.

Summary & Key Takeaways

• Many people do not think about the company behind a product they enjoy, which is a valuable aspect to consider when evaluating companies.

• Understanding the percentage of overall sales that a specific product represents for a company is crucial in evaluating its potential impact.

• Assessing the potential growth of a new product or service is key in determining its significance to the company.