Stock picking is the core of value investing. Legends like Warren Buffet, Rakesh Jhunjhunwala, and Vijay Kedia are Masters of It.
In this post ,l will teach you how to analyze stocks like a professional.
Stock picking plays a pivotal role in identifying undervalued companies with significant growth
potential.
Here are 7 points to check before investing in any company.
Let’s start...
(Last one is the most important)
Business profile:
How does the company make money?
If the business profile doesn’t look attractive or money-making system is complex for you to
understand, you can stop looking into the company right away.
Always invest in companies whose business is easy to understand and within your circle of
competence.
Management and Promoters structure:
You want to invest in companies with good management who are focused on long-term growth. Look at the track record of current management. Look whether insiders are heavily buying into their own stock, it’s a great sign.
I have seen many promoters who are just dumping their shares to retailers and exiting. Avoid such companies.
Moat:
Just like strategy provides an edge in trading to a trader. A moat is a unique competitive advantage that a company has over its competitors.
Invest in clear market leaders with strong pricing power.
For eg:
e Titan in Jewelry
e BSE in stock exchange
Growth capital:
Good companies don’t require much capital to grow. Check their annual report and seeing which companies are growing in revenue and profits, but the increase in expenses are very less.
CAPEX/Sales and CAPEX/Operating Cash Flow are 2 great metrics to look at the capital efficiency of a company.
Capital usage:
The most important task for company management is to use the capital wisely.
We want a company that is re-investing in its business and buying their own shares. You want to invest in companies with a ROIC > 15%
Balance sheet & profitability:
Only invest in companies which are in good financial health. Don’t trust what their management is speaking , see their results in balance sheet.
We want companies with low debt, high cash flow & high gross margins.
Outlook:
This is most important. Good past records don't gurantee future growth. So it iss very important to invest in a company with a good outlook.
Seek companies which are active in a secular trend. Invest in the Future.
Renewable Energy, EV, Ecommerce, Digital Payment, Luxury Etc.
In this post ,l will teach you how to analyze stocks like a professional.
Stock picking plays a pivotal role in identifying undervalued companies with significant growth
potential.
Here are 7 points to check before investing in any company.
Let’s start...
(Last one is the most important)
Business profile:
How does the company make money?
If the business profile doesn’t look attractive or money-making system is complex for you to
understand, you can stop looking into the company right away.
Always invest in companies whose business is easy to understand and within your circle of
competence.
Management and Promoters structure:
You want to invest in companies with good management who are focused on long-term growth. Look at the track record of current management. Look whether insiders are heavily buying into their own stock, it’s a great sign.
I have seen many promoters who are just dumping their shares to retailers and exiting. Avoid such companies.
Moat:
Just like strategy provides an edge in trading to a trader. A moat is a unique competitive advantage that a company has over its competitors.
Invest in clear market leaders with strong pricing power.
For eg:
e Titan in Jewelry
e BSE in stock exchange
Growth capital:
Good companies don’t require much capital to grow. Check their annual report and seeing which companies are growing in revenue and profits, but the increase in expenses are very less.
CAPEX/Sales and CAPEX/Operating Cash Flow are 2 great metrics to look at the capital efficiency of a company.
Capital usage:
The most important task for company management is to use the capital wisely.
We want a company that is re-investing in its business and buying their own shares. You want to invest in companies with a ROIC > 15%
Balance sheet & profitability:
Only invest in companies which are in good financial health. Don’t trust what their management is speaking , see their results in balance sheet.
We want companies with low debt, high cash flow & high gross margins.
Outlook:
This is most important. Good past records don't gurantee future growth. So it iss very important to invest in a company with a good outlook.
Seek companies which are active in a secular trend. Invest in the Future.
Renewable Energy, EV, Ecommerce, Digital Payment, Luxury Etc.