How to select value stocks?
Wouldn’t you like to invest in coal to get diamond in return? Well, who wouldn’t like this?
When I invest in stocks I first do a Top Down Analysis – Which is Analyzing the economy first then analyse a particular sector and in the end a specific company. If the economy is doing well various sectors would perform well and so do the companies. These factors should be analyzed all together and a decision should be taken based on the results.
Investing in stock involves various calculations like DCF analysis, trend analysis and many other technical and fundamental parameters.
Investor must posses patience and proper knowledge.
How to identify Value Stocks/ Multibaggers:-
- Go for a company which gives regular dividend. Dividend paying stocks mostly are A group category with sound fundamentals. This categorization is mainly based on the market cap of the stock.
- Preferably go for a Mid cap stock which in future can become a large cap. Mid cap stock have a greater chance to move upwards and that to fast. Preferable a stock whose market cap is less than 2500 Crores.
- Go for a stock in a particular sector which is in boom.
- Look out for the companies financial. Check out for the companies profit last 4-5 years and check it out that it is increasing every year. One can also check out EPS of the company. EPS should be compared with the pear companies from which you can derive how much is the earning in per share worth.
- Check out whats running these days, Say for example there is a invention of a new technology which will be in demand in a near future. An excellent example is invention of 4G. Indian Pharma and IT companies gaining big because of economies of scale.
- Check out for a companies order value. There are various companies which have a good amount of orders for future which are of great importance to a company. Best example here would be Larsen and Tubro and several other engineering and construction companies.
- One can also look out for a company which has good amount of land / property. Unitech had a lot of land which can in the eyesight by end of 2005. An investment of Rs 40,000 then would be worth over 1 crore by the end of 2007. Though the things now are not so great, timely exit have made investors rich in this stock.
- There are many other factors you can consider which are sector specific.
- Last and not the least be confident in your stock. You should learn how to handle your investments wisely.
Here is an interesting report from equitymasters on “Proven Approaches to picking Multibager Stocks”
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