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Signs of promising stocks
THE MOTLEY FOOL
Ask the Fool
Published: August 26, 2025
Q: What are the traits of the most promising stocks, and can they be found in a rising market? -- M.E., Kittery, Maine
A: Traits to favor include a healthy balance sheet (less debt, more cash), profitability, growing revenue and earnings, a large target market to tap, a compelling business model and a reasonable or low valuation.
Read up on each company to understand its growth prospects, competitive advantages, risks and challenges. Study its annual and quarterly reports, and look up news stories about it and its industry.
The most promising stocks are often more attractively priced in falling markets, but they can still be good investments in rising ones. Still, pay closer attention to the company, its quality and its price than to the current trend in the market.
Q: How do I figure out the cost basis for a stock I'm selling, for tax purposes? -- K.S., Caldwell, Idaho
A: Brokerages these days are generally required to collect and retain tax basis information on most transactions, so check your account for that info.
Here's how to do the math, if you need to: Imagine that you bought 100 shares of Buzzy's Broccoli Beer (ticker: BRRRP) for $40 each, and you paid a $10 trading commission. Your cost basis is the purchase price ($4,000) plus the commission, or $4,010. Divide $4,010 by 100, and you'll get a cost basis per share of $40.10.
If you eventually sell the shares for $60 each, or $6,000 -- again paying a $10 commission -- subtract the commission to get net proceeds of $5,990, or $59.90 per share. Your taxable capital gain is the difference: $5,990 minus $4,010, or $1,980 -- $19.80 per share. Many brokerages now charge $0 for trades, making the math easier.
Fool's School
Getting Out of Debt
One of the most powerful things you can do to improve your financial health is to get out of high-interest-rate debt -- such as that from credit cards. (A mortgage loan with a relatively low interest rate is far less troublesome.)
The average credit card interest rate was recently 24.33%, per LendingTree.com. If you owe, say, $25,000 on your cards and you're being charged 24% annually, you're looking at owing another $6,000 per year for interest alone. That piles on to your existing debt, which can cost you more and more in interest and eventually spiral into a financial catastrophe.
So how can you get out of debt? Here are some strategies:
-- Begin by not adding more to your debt. Try leaving your credit cards in a desk drawer -- or taping reminders on them to keep your spending in check. You can opt out of getting credit card offers in the mail by calling 888-567-8688 or by visiting OptOutPrescreen.com.
-- Call your credit card issuer(s) and try to negotiate a lower interest rate. You might point out that you've been a loyal customer and that you could take your business elsewhere, perhaps to a balance-transfer card. Many people have gotten their rates lowered significantly just by asking.
-- Consider moving your debt to a reputable balance-transfer credit card. These typically charge you 0% for an initial period, which might be a year or even longer. (You can find some at Fool.com/money.) Once you do transfer the debt, work hard to pay it down before the interest rate reverts to normal.
-- Spend less in order to free up funds to pay down debt. Perhaps eat out at restaurants less often, cancel subscriptions you don't use much (like a gym or certain streaming services), and put off big purchases. You might also earn more by taking on a side gig for a while.
-- Pay off debts with the highest interest rates first to save yourself the most in interest.
My Smartest Investment
A Profitable Divorce
My smartest investment was my house. Over 40 years ago, I was newly divorced and raising two sons. My boss said she would move me to full-time and double my salary only if I promised to buy my ex-husband out on the property we'd purchased in 1971 for $24,000. I called him and he said, "Oh, you can have that old place!" Ten minutes later, he called me back and said, "Just give me $30,000 for the house and property." I ran to the bank and got a loan for $50,000 and gave him $30,000. With the other $20,000, I bought new windows, doors and a roof.
Last month, a real estate agent offered me $1.2 million for the property. I declined, as I'm now 83 and my older son wants the place -- it's now 100 years old, built in 1925! I saw my old boss recently and told her I would not own a house if it had not been for her wise advice. -- S.C., via email
The Fool responds: Congratulations! Real estate isn't always a great long-term investment, but it can be. And it's good to own the roof over your head. Divorce is not uncommon, so married folks might want to think about how they'd get by on their own, just in case.
(Do you have a smart or regrettable investment move to share with us? Email it to TMFShare@fool.com.)
Foolish Trivia
Name That Company
I trace my roots back to 1978, when four people began designing semiconductors in a dental office's basement in Boise, Idaho. My first contract was for a 64K memory chip. I launched a production facility in 1980 and debuted the world's smallest 256K DRAM chip in 1984. I bought Texas Instruments' memory business in 1998 and became one of the world's largest memory-chip makers. With a recent market value topping $140 billion, I claim to be "the only company manufacturing today's major memory and storage technologies: DRAM, NAND and NOR technology." I have more than 50,000 patents. Who am I?
Last Week's Trivia Answer
I trace my roots back to 1941, when a surgeon launched me as the Orthopedic Frame Company, to produce products for his patients. In 1942, I debuted the Wedge Turning Frame, to safely turn patients with spinal injuries. I patented an oscillating saw for cutting casts in 1947. I went public in 1979 and bought a robotic surgery company in 2013. Today, based in Michigan and with a recent market value of over $140 billion, I'm a giant in the medical devices industry, helping more than 150 million patients per year. I rake in more than $23 billion annually. Who am I? (Answer: Stryker)
The Motley Fool Take
Strong Potential, With Risks
Shares of all-digital bank SoFi Technologies (Nasdaq: SOFI) have more than doubled over the past year. It's attracting new members with its easy-to-use app and original marketing, which is reaching its target market of students and young professionals. With its strategy of cross-selling and upselling, it gets customers to engage at a high rate and buy more products as they use the platform.
SoFi's adjusted net revenue increased 33% year over year in the first quarter of 2025, its fastest growth in the past five quarters. And it added a record 800,000 new customers, a 34% year-over-year increase, for a total of 10.9 million.
SoFi started out as a lender and has expanded into a full financial-services platform. It's a low-cost, fee-based business, which helps its bottom line. But SoFi is young and largely unproven, and it's still mainly a lending business, though it's doing a great job of diversifying; that leaves it vulnerable to changes in interest rates.
The stock isn't cheap, either, with a recent forward-looking price-to-earnings (P/E) ratio of 57. But given its growth rate, that's not wildly expensive. SoFi is just getting started, and it's hard to overestimate its long-term opportunities. It envisions becoming a Top 10 bank, and if it can continue to generate new business and capture market share, that's a distinct reality down the line. If you're a risk-tolerant long-term investor, take a closer look at SoFi.
COPYRIGHT 2025 THE MOTLEY FOOL, DISTRIBUTED BY ANDREWS MCMEEL SYNDICATION, 1130 Walnut, Kansas City, MO 64106; 816-581-7500.