Before investors take a flyer on a company like Nikola, they should consider these five things

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Peter Hodson: Step one is to take a close look at the founder or CEO of the company

A company with real sales is less risky

Let’s face it, no investor has the ability to properly evaluate all the potential emerging technology out there. Some is real, some is hype, some is fraud. One of the best ways for an investor to gain comfort is to look for actual sales. When a third party ponies up cash, then at least we know there is a product that customers want. Without this, one never really knows.

We don’t follow the company closely enough to make any sort of investment suggestion. We are not likely to, either. But a company with an expensive valuation, minimal sales, negative cash flow, short sellers circling, nepotism, losses, over-promotion is certainly not the type of investment we look for.

Peter Hodson, CFA, is Founder and Head of Research at 5i Research Inc., an independent investment research network helping do-it-yourself investors reach their investment goals.

 

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