1.A good company doesn’t mean it’s a good stock
Often companies that provide great products and services make poor investments. They are sometimes worth trading, but not always. There are couple of reasons that a great company doesn’t always make for a great stock.
In some cases, the reason customers like a company are because shareholders are subsidizing the costs. This is the case with Uber, which many customers love. The problem for shareholders is that the company is subsidizing costs to undercut competitors. Uber loses money on every trip, so the more trips it does, the more shareholders lose.
Another reason is that great companies, become popular with customers, and that attracts competition. If the company doesn’t have an effective moat, its margins will be eroded until there is nothing left for shareholders.
This doesn’t mean great companies are never great stocks. If a company has something unique that can’t be replicated—like Apple, Nike and Google do—then it can be a great investment. But don’t assume a good company will make a good investment.