“Long ago, Ben Graham taught me that ‘Price is what you pay; value is what you get.’ Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” -
Warren Buffett
A brief note on the Steps to select a stock to invest into in the Indian Stock Market
1.Management of the company
- Efficiency and consistency of management (longevity as well..)
- Strategy and goals of the company.
- Execution Potential and consistency of execution.
- Insider buying and buybacks ( we do not like this)
- Perks and Compensation to Staff and Workers '
- Transparency
2. Fundamentals of the company.
- Earnings per share (EPS)
- Price to Earnings Ratio (p/e)
- Price to Book Ratio (p/b)
- Debt to Equity Ratio
- Return on Equity
- Price to Sales
- Current Ratio
- Dividend Track Record
- Sales growth and Operating Profit Margin
3. Do we understand the products and services offered by the company. What we do not understand we do not buy?
4.Will people still be using the products and services of this company 10-15 years from now. (at least 5 years !)
5. Does the company have a low cost competitive durable advantage?
6. Does the Company have a MOAT
- MOAT in stock market investing is a term coined by Warren Buffet.
- A moat is a deep, wide ditch surrounding a castle, fort, or town, typically filled with water and intended as a defense against attack. Some stocks have a similar moat around them. That’s why it’s really tough for its competitors to defeat them in its sector.
7.What is the company doing that its competitors are not?
A portfolio based on these parameters does not necessarily track the stock market indices - but provides an equity investing portfolio which is consistent on returns and offers a lower risk within the equity asset class.
On a risk return perspective it is certainly a theme in which your monies should be invested to start with. Risk can then be further increased if returns are favorable.
DISCLAIMER : THIS BLOG IS FOR INFORMATION AND NOT TO SOLICIT ANY BUSINESS. PAST PERFORMANCE IS NOT AN INDICATION OF THE PERFORMANCE OF STOCK IN FUTURE. EQUITY STOCK INVESTING IS A WITH RISK INVESTING INCLUDING RISK ON CAPITAL INVESTED. PLEASE TAKE AN INFORMED DECISION BEFORE INVESTING IN A EQUITY STOCK.
