Strategy to find value stock
Everybody wants to invest money. They have different life goals; there are so many ways to invest money and bank deposit assets; Everyone has different life goals, which can be categorized as short-term, long-term short-term goals may be for 1 year or less, medium-term goals 1to 5 years, and long-term goals more than 5 years.
short term goal- Invest in debt
Medium-term goal-Invest 50%-50 in debt and stock
long term goal- Invest in gold and stock(25%-75)
Apart from this, also take the terms health and property insurance; for wealth creation, stock investment is the best option.
Real estate commodity and stock market. The Stock market is the quickest way to earn, but it has huge risks. Also, one who has knowledge about the stock market can choose profitable stock. One who has knowledge about the stock market can choose profitable stock. One who is from a commerce background or finance understands market terminology and market very well but who is from a non-finance background.
Now time to understand how to choose stock for investment here are some conditions to
1) Consistency-> To invest in any company, first analyze how long time that company has been doin this business. The company should have 10 or 10 ➕️ years.
2)Promoter’s holding-> Another filter is promoter’s holding should be 51% investment in that company where promotor holding 51% promotor is the person who will do work in hand for the betterment of the company.
If the promotor holds less and is selling his stake motivation for the growth and the betterment of the company, the promotor holds good for the company’s growth.
3)Sales and revenue -> Sales and revenue is another filter for any company. Sales and revenue continued to grow in mandatory 15% to 20% growth, which should be Yoy. Growth should be in terms of revenue and Sales.
Revenue should increase, but per unit sales increased.
4) Net profit-> Net profit also a filter also a filter. Net profit= Revenue- Expenditure.
Profit is the lifeblood of any business. Every business’s motto is profit without profit so the business can sustain itself; when stock is selected for 8-10 years, profit increments by 20% every year.
5)Leadership-> To select a company Leadership is that point, where an investor can faith without thinking much when you are going to select stock and find out who is leading the company, A leader can change the fortune of the company and the future of its investor, such as Indians biggest business group, The Tata group, reliance some other example Infosys, Wipro, these leaders are biggest assets of company.
Every investor should learn about the vision and mission of the company, how much time a leader leads the management and the background of the leader. The auditor of the company is also a keen point of the reputation of an auditor in the market.
6) Debt-free company-> When an investor chooses a debt-free company, it will be the most profitable investment; if a company is debt-free Ii, it will be more profitable.
Some companies have heavy debt and can be loan defaulters, such as Alok Industries, Amtek Auto, and Bhusan Steel Ltd.
7) Operating cash flow-> Cash flow is an essential part of the business’s daily activity; when the company sells its product, it will receive profit cash flow.
There are three types of cash flow.
a) Operating cash flow-> generating from core operation
b) Taking a loan- Cash flow increases, when a company takes loan from bank
c) Selling assets- When a company sells its production services and gets cash, increase the cash flow
Formula
Operating cash flow-> Cash flow from operation / Current liabilities
Three perameter before investing
a) Sales growth( top line)- 20% yoy growth should be
b) Net profit(bottom line)- 20% year-on-year growth to be there
c) Net Operating cash flow should be positive and 75% of Net income
Cash is king, and cash always wins
8)Return on equity-> ROE measures the profitability of any business; it measures how much profit is generated with shareholder equity. Shareholder equity means shareholder all assets, minuscule liabilities. The surplus for investment in any company’s return on equity ( ROE) should be more than 15%.
9) Return on capital employed-> Return on capital employed means how much earnings remain on total shareholder fund and loan.