How to Tell If a Stock Is a Long-Term Investment

Do I stay or do I go?

The decision whether to hold onto a stock may be among the most difficult choices a long-term investor has to make. 

Fortunately, a little education makes it far less risky than a Las Vegas roll of the dice. 

Chris Versace, co-portfolio manager of Action Alerts PLUS, broke down how fundamental analysis can be used to inform your thinking in this sneak peek from the daily AAP video update.

J.D. DURKIN: In an alert, you reinforced your conviction in ChargePoint despite the sell off yesterday. You said you would look to add shares if the stock remains pressurized, if it remains there. Using ChargePoint as an example, how do you balance short term headwinds with long term potential?

CHRIS VERSACE: So we know, particularly what we've seen in the market of late, it's extremely volatile. And what we like to do is really focus on the key drivers for why we added a stock to the portfolio or why we're looking at a stock for the portfolio because we want to focus in on what is really going to drive it not just one day, not one week, not one month but really over the evolving three, six, 12, sometimes 18 months ahead of us.

And in the case of ChargePoint, the stock has been volatile. It's a high beta stock. We actually added to the position earlier in the week when it was right around the same price point ahead of the midterm elections because we took another look at what the, again, long term drivers are for the opportunity with ChargePoint shares. And there are several, everything from the continued build out of EV charging stations funded by the Biden infrastructure law to the continued adoption of EVs.

And even though auto loans are getting incrementally more expensive, we have to remember that we have the EV tax credit really coming in starting in January 2023, and that's going to last for 10 years. So that's going to help make EVs more affordable. So the key here is when stocks are getting battered and pushed around, if the longer term fundamentals are in play, that's an opportunity to swoop in, scoop up the shares, and from time to time, improve your cost basis. And that's exactly what we did with ChargePoint.

ChargePoint  (CHPT) - Get Free Report is a holding in the Action Alerts PLUS investing club. See how the AAP team is approaching the stock today here.