Three factors to consider when buying US stocks

The last one year has seen the launch of several apps that enable retail investors in Nigeria to invest in foreign investments including US stocks.

In some ways, this is an entirely new playing field for them. Here are three factors to consider when investing in the US stock market

Earnings

Earnings are a key factor to consider when investing in the US stock market.

Earnings per share is the profit of a company divided by the total number of shares it has issued.

Earnings yield is the earnings per share divided by a stock.

For many US stocks, dividend payout is quite low. Companies there prefer to reinvest their earnings into projects till they reach the maturity stage.

A significant and consistent growth in earnings over time filters into a higher valuation of the company’s shares.

Global macro factors

Many US companies have key components of their operations across the world. As such, one has to monitor what happens in these countries.

The Coronavirus, for example which originated in China has led to supply disruptions for many US companies. China is also a key market for them.

A slowdown in China will ultimately lead to lower profit for them.

Micro factors

Some industries can be fiercely competitive, as such you have to constantly make sure whatever company you invest in maintains its space as an industry leader.

If it is a tech firm for instance, check out factors such as number of users, average revenue per user, time spent on the site/app. Do this in comparison to their competition as well.