This is really part of step four.... WHY are they increasing their profits every year?

One of the things I look for is a company with some kind of monopoly or strong franchise....

This is an important point for investing with security and confidence.

A company with a monopoly-like position, or a strong brand name, in a product that people really want, is in a very powerful position to control the prices of their products. Otherwise, their profits can be eaten away through price-competition.

So, in general, I prefer to avoid companies which produce commodity-type products (like steel or wool), where it is easy to replace the products from one company, with the products from another.

Instead, I look for monopoly-type positions (such as a monopoly through intellectual property), or strong brands, so it is harder for their profits to be eaten away by the competition.

If this is the case with a company, and if it also passes all the other checks I mentioned before, then I can invest in it with security and confidence!

- Dien Rice