How To Pick Right Stocks
When you want to start investing, then first you have to buy share.
How to find a good share ?
This is the biggest question, but this question will help you to make big wealth.
To become a good investor, it is very important to buy a good share. how to pick right stocks
Many people will tell you that this share is good, or there are a lot of video’s on YouTube Channels which will tell you which share is good.
If you want to buy stock, then first you have to learn that which share is not buy.
How to identify bad share?
- The company whose management is not good or there are issues of corporate governace.
- The company’s track record is poor.
- The balansheet does not have some value.
- The company has less asset.
- The company does not give dividend.
- Financial performance is week.
- The company depends more on the economic factor.
- The company should be very dependent on the policy of the government.
- This is some factor that you have to keep in mind.
How to pick right stocks ?
check the following :-
- Balance sheet of the company.
- Study business of the company.
- Check company products.
- Watch management interview & AGM – annual general meeting.
- Technical – Stock Charts.
- Fundamental of the company – ROE, ROCE,Profit growth.
- Favorable long term economics business.
There are two ways of investing.
- Value Investing
- Growth Investing
What is Value Investing ?
Value investing is easy. Example: – There is a mobile whose market value is Rs – 50,000 and you are getting 25 thousand in online sale, then you would like to buy that mobile? If you see value, then you will buy that mobile.
Value Investing means simple, the price at which the share is trading is higher than the intrinsic value of the share. The cash, reserve, asset and plant – machinery of the company is more than share. ex: – The cash in the balansheet should be Rs. 500 per share but company trade Rs 400 per share.
What is Growth Investing ?
Company is showing good profit growth at the quarterly rate (Q on Q) or year after year (Y on Y).
Generally growth stocks trade expensive because the market feel that the earning visiblity of the company is very high and the market also gives that share a price like earning in future.
ex: – happiest minds, dixon tech,d-mart etc.
What is the difference between growth vs value investing ?
The share in value investing seems to be of very low value and the price of share in growth investing looks expensive.
The PE multiple of a share in growth investing is 30,40,50,100 or more because growth stock profit growth is more than 40%
What is PE ? How to pick right stocks ?
Price means share price, Earning means EPS (earning per share) If you divide the share price by eps then you will get pe multiple. Ex: – The share is trading at 1000 and the EPS of the share is 20, the share is trading at PE multiple of 50.
Nifty PE – Price Earning Ratio – If you look at the history of indian stock market, PE has moved in the range of 10 to 30. But not below 10 and not beyond 30 but in 2020-21 PE is go beyond 30+.
Nifty PE is in the range of 10 to 15, then the market valuation is cheaper.
PE is in the range of 25 to 30+ then the valuation of the market is expensive.