Stocks are very unpredictable. But, from my brief experience dabbling in them, there is a simple and clear rule that never fails: good companies stocks go up and bad companies stocks go down.
Take for instance the prime example of blockbuster vs netflix. If you had to predict 3 years ago which company would be performing better today, which would you have chosen? If you had to put money on it, such as $2000, which company would you have trusted? If you picked netflix, your $2000 would be $12000+ today. If you picked blockbuster, you would have lost it all.
On hindsight, it's pretty easy. But let's take a look at several companies today and try to figure out who will end up the winner 3 years from now.
Cell provider
AT&T - 27.93
Verizon - 30.91
Sprint - 4.56
Metropcs- 9.77
So, looking at the current landscape, AT&T and verizon currently have sizable leads in marketshare. AT&T has the benefit of the iPhone while verizon is basking in the success of great marketing and customer service. Then you have the old warhorse in sprint and the new upstart metropcs. In 3 years, which company will be at the top?
I can't give you a rock solid prediction. Nobody can. Can you predict if apple will continue to make AT&T it's only provider? Will verizon suddenly fall off due to overpricing? Will metropcs become the neat new company that takes the tech world by storm? These are all questions as you evaluate each of these companies.
I always like to look at the upstarts and underdogs. AT&T has maximized its potential. It may rise and fall moderately but Its days of innovation seem too far gone. Verizon has also appeared to have hit its peak. Not much is new in terms of its plans,and the droid is doing a decent job of keeping it's current subscribers but still nothing earth shattering.
That leaves sprint and metropcs. Of these 2, metropcs has the biggest room for growth, simply based on it's relative youth. You can see that potential word creeping in where the other 3 companies could be seen as older veterans ready for retirement.
If you look at the trending of the past 6 months, you see strong positive signs with around a 30% return. This appears to be due to their ability to tap into various markets such as the prepaid phone market. These types of moves are the ones that could help spark a company to become the leader of the pack.
I'm no stock expert but common logic is good companies are good investments. Just be careful to invest what you can afford to lose because you never know if that stock will be a netflix or a blockbuster.
