A friend of mine was planning on buying some stocks in India and China because of the impressive growth there. He is a very conservative investor and wanted to buy sure things like electrical utilities, water plants, infrastructure companies, etc.
My advice to him was that these companies costed x amount, generated y income and therefore where easily valued by knowledgable investors. If he bought these, those stocks would stay flat or increase by the standard inflation rate yearly. No big returns.
His stocks lacked the dream factor. When you own a stock, you immediately become a seller. You want to own a stock that people want to have. You want a stock that generates excitement. You want people to throw their life savings at it, resulting in a giant increase in price. Internet stocks did that, technology stocks do that, oil stocks are doing that. People dream of gargantuan growth, the sky is the limit, billion dollar contracts are signed and more will come. Hence the dream factor.
That does not mean you buy a crappy company, it means you buy a fundamentally sound company but with the element of dream in it. People want to believe this company is going to grow forever, make billions of profits, has technology that is going to chage the world.
He needs to look for the dream factor in a company.
His whole concept of stock buying changed after our converstation.
I hope it was good advice.
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