Seven thumb rules that can help you pick right stocks in market
The very nature of stock investment may at times leave the best of mind scratching their head. If you are new to equities, worry not. We have a handy guide in place to help navigate this uncertain world.
The thumb rule is one has to be sound in basics before funneling the hard-earned money in stocks. Consider these seven must-haves.
1. Nature and outlook of businessCheck the true nature of business along with past financial track record of the company and see whether the current policies and projects are value generators for future. The final investment decision is made based on current industry outlook. Also, don't chase stocks blindly that have given multibagger returns over a short period. Make proper research before taking any step further.
G Chokkalingam, founder and MD, Equinomics Research & Advisory, said, "Many first-time investors lo ..
The thumb rule is one has to be sound in basics before funneling the hard-earned money in stocks. Consider these seven must-haves.
1. Nature and outlook of businessCheck the true nature of business along with past financial track record of the company and see whether the current policies and projects are value generators for future. The final investment decision is made based on current industry outlook. Also, don't chase stocks blindly that have given multibagger returns over a short period. Make proper research before taking any step further.
G Chokkalingam, founder and MD, Equinomics Research & Advisory, said, "Many first-time investors lo ..
2. Uniqueness in business model
A profit-generating unique business model is a very good sign. Besides, less cyclicality coupled with diversified business base are another very good factor to consider, said Vinod Nair, Head of Research at Geojit Financial Services.
3. Profitability
First-hand knowledge of the company's bottom line, topline and it debt load is a must. You need to read up the quarterly and annual earnings reports of the f ..
A profit-generating unique business model is a very good sign. Besides, less cyclicality coupled with diversified business base are another very good factor to consider, said Vinod Nair, Head of Research at Geojit Financial Services.
3. Profitability
First-hand knowledge of the company's bottom line, topline and it debt load is a must. You need to read up the quarterly and annual earnings reports of the f ..
. Quality of management
Get some view on the quality of management of companies. If it is not possible to get a preliminary view, then go in for time-tested managements rather than buying stocks of unknown managements, especially when the valuation is not cheap.
5. Debt/equity ratio
This ratio is very important as it will help one understand how much debt a company carries as against the number of shareholders. Generally, the lower the ..
Get some view on the quality of management of companies. If it is not possible to get a preliminary view, then go in for time-tested managements rather than buying stocks of unknown managements, especially when the valuation is not cheap.
5. Debt/equity ratio
This ratio is very important as it will help one understand how much debt a company carries as against the number of shareholders. Generally, the lower the ..
6. Valuation
Valuation is another important metrics used to know whether the stock is expensive, attractive or fair. Companies are calibrated against each other on the basis of valuation ratio to determine whether they are over/undervalued in the industry. The most popular ratio used is P/E (Price/Earnings). For banks, it is best to use P/B (price-to-book) ratio while capital-intensive companies can use EV/EBITDA.
. Control your anxiety
One should keep one's anxiety in check while chasing stocks for rumour and speculative news. Do not rush to buy a stock based on such buzz without properly checking the valuation for such new developments, Chokkalingam added. Once the trade is executed, it cannot be reversed for the mistake made on valuation. It is better to let go the "opportunity", which seems to have been created by rumour and speculations, rather than burn your savings, he tell ..
Valuation is another important metrics used to know whether the stock is expensive, attractive or fair. Companies are calibrated against each other on the basis of valuation ratio to determine whether they are over/undervalued in the industry. The most popular ratio used is P/E (Price/Earnings). For banks, it is best to use P/B (price-to-book) ratio while capital-intensive companies can use EV/EBITDA.
. Control your anxiety
One should keep one's anxiety in check while chasing stocks for rumour and speculative news. Do not rush to buy a stock based on such buzz without properly checking the valuation for such new developments, Chokkalingam added. Once the trade is executed, it cannot be reversed for the mistake made on valuation. It is better to let go the "opportunity", which seems to have been created by rumour and speculations, rather than burn your savings, he tell ..