Buying a stock is technically buying a piece of a business. Will you buy any business without thoroughly understanding it?
Most of the investors will answer the above question in negative but when it comes to actually making the buying decision in stocks, they look for hot tips, tend to trade too often and too soon and believe anybody who gives any credible story on the business without doing any due diligence.
How often you have heard that people will talk about how buying ‘shares’ is akin to ‘gambling’. With the temptation to make quick buck, most of the investors, without even doing an elementary research about the stocks, invest their hard-earned money simply on the advice of a broker or a friend or sometimes even a random analyst on business channel(s). It is a pity that we do more research before buying a cell phone than before investing into a stock! No wonder, such investors invariably lose money in stocks and then label stock markets as ‘ Casino ’.
Another common tendency of investors is to ‘chase’ stories.
“Something new, I must have it, what if this is that stock that will make me rich… I can’t miss it.”
“This guy at the office told me that he is hearing some problems with this company, It is also down 5% today, I should sell this. I don’t want to lose all my money in this.”
“I have doubled my money in the stock.. Let’s just sell it and book profits”
There are many such reasons why people buy and sell their stocks. People tend to trade more often and make less money.
Why trade for short-term when there are stocks of quality companies that could go up multi-fold over the next few years.
9 out of 10 traders make losses in all kinds of trading. It is not by accident but is designed that way. The only guys that make money in this process are stock brokers.
Choice is yours – get rich slowly & consistently or get poor quickly.
India is a developing nation with tonnes of opportunity making it a dreamland for any long-term investor. A strong Government at center, prospects of better governance, favorable demographics, consumption boom and a trillion dollar infrastructure investment makes a solid case to invest in India. If you believe in the India story, it is imperative for you to select right stocks in the right industries to participate in this great story and we can help you with that.
The winning strategy in wealth creation is to identify few good companies, buy their stocks at attractive prices, track their performance closely & stick to them till they perform. Buying such off-the-radar and under-tracked stocks when no one was even talking about, becomes the next hot stock one day. You don’t have to have a portfolio of 40-50 stocks (over-diversify) or bet all your money on just 2 or 3 stocks (over-concentrate). You have to strike the right balance. Indeed it sounds simple but as Warren Buffet puts it ‘Investing is simple but not easy’.
[toggle title=”Quality of Business”] A lot of our time goes into understanding the economics of a business. We have proprietary screens where we filter the companies on the basis of various balance sheet and cash flow ratios and we spend our time understanding businesses which pass our initial screens. We do not invest in any company where we don’t understand the business and which doesn’t pass the initial filters. [/toggle]
[toggle title=”Management Quality”] Investing in a great business can be injurious for shareholder’s wealth if its run by a dishonest/ unethical management. We evaluate the management on the business decisions taken in past, their accounting policies, their actions in past for minority shareholders amongst many other parameters. The management of a company has to clear an exhaustive checklist for us to be interested in that company. [/toggle]
[toggle title=”Downside Risk Management (Margin of Safety)”]
[toggle title=”Awareness of Business Cycles”] There are very few things that go in one direction. Things get better and things get worse. There is eventually a cyclicality in most of the things and great amount of money is made and lost when investors forget this important point. Extrapolations of positive and negative news are a norm in the industry and to take informed judgement against the prevailing extrapolation can give phenomenal return to investors who are able to do it successfully. We are conscious of the above facts and try our best to be well informed and take advantage of such cyclical events. [/toggle]
Past Stock Ideas
[tab title=”Tasty Bite Eatables” id=”t1″] We shared this stock idea in April 2015. It has been a classic case where we were among the first few to identify this emerging Processed Foods company. Though the stock has been a 2x already, we believe the stock has multiple triggers in place to make it a multi-bagger over next 4-5 years. Please download the report from Here.[/tab]
[tab title=”Amrutanjan Healthcare” id=”t2″] We shared this stock idea in November 2014. This too has been a classic case where we were among the first few to initiate coverage on this emerging FMCG story. We believe the stock has multiple triggers in place to make it a multi-bagger over next few years. One can comfortably keep buying till the levels of Rs 425, given the investment horizon is 3-4 years. Please download the report from Here.[/tab]
[tab title=”EPC Industrie” id=”t3″] This Mahindra group company is one of the largest in the organized micro-irrigation space. The space is seeing lot of policy action and seems to be placed well for a structural run. EPC is a another example where we picked an emerging story early. Download the Report. Please note that this report is only for showcasing the depth/process of our research and this may or may not be in our current buy list.[/tab]
[tab title=”Relaxo Footwear” id=”t4″] We picked up this emerging consumer stock at Rs 75 (adj. price) in Aug 2013 and we have been lucky to have already clocked over 700% return on this investment, and still holding full position. [/tab] [/tabbed_section]
How do we do it?
- Regularly screen over 5,000 companies listed on Indian stock exchange using our proprietary quantitative filters.
- Check the company from ‘Corporate governance checklist’ and ascertain that the management runs business ethically. We strongly believe that a great business run by a crooked management will not create wealth for minority shareholders.
- Carry out an exhaustive quantitative analysis of the company and its competitors to see understand the financials of the company and industry
- Carry out an exhaustive industry and company research which involves
- Reading various industry journals
- Meeting buyers and suppliers of that industry to understand industry’s value chain
- Meeting company and its competitors’ managements to get their perspective and future prospects
- Channel checks to get a feedback on company’s products and policies first hand from dealers and distributors and getting the feedback directly from horse’s mouth i.e. end users.
- Study valuation trends of the company and sector over the past decade to understand whether current price offers any margin of safety. Only those stocks make it to the final list which meets all the criteria.
And we distill all this work into easily comprehensible and strongly researched stock and industry reports.