The stock should be of a ‘good quality’ company and it should be available ‘cheap’. Sometimes, value investing gets confused with buying whatever is available cheap.
If you have high conviction in your idea (doing your own research into the company is a prerequisite here. So if your idea stems from an "expert" tip, forget about it), there is no harm in buying at one go, if you believe the stock is under or fairly valued.
The financial statements come with schedules and notes to accounts that give a more detailed view and explanation of various policies.
A lay investor may find the schemes of arrangement a very difficult document to read, but it’s one of the most important ones. This is where many companies get away with doubtful accounting practices and wash away some of their sins.
A company’s financial statements can give clues if something is not looking right. Here’s a primer on where and what to look for
Average revenue per user, which is calculated by dividing total revenue by the number of subscribers
It is important to understand the basic business model. Is the company selling finished drugs or APIs? Does it sell in regulated markets or markets with low regulation?
Part 21 of the Moneycontrol Classroom deals with key parameters to look at when considering investing in the IT sector.
Here are the key parameters you should consider when investing in fast-moving consumer goods (FMCG) companies.
While India is one market, transporting cement across long distances is not feasible. Which region a company is located in, the capacity situation in that region and whether the leading company in that region is rational about pricing makes a big difference to the profitability of companies in that region.
For the principal activity of lending, banks earn a spread, which is the difference between the cost at which they borrow funds and then lend it to their customers.
Revenue passenger kilometre is the sum of paid travellers in an aircraft multiplied by the distance it flew. One passenger who has paid for his ticket, flying one kilometre, equals one RPK. It is an indicator of demand.
When investing in auto companies volumes, realisation, revenue, gross profit are key parameters.
For example, if we compare two companies whose asset base is same, the company that has been able to generate higher sales on the same asset base is more efficient user of the asset.
Metrics that help analyse if a business efficiently manages its day-to-day cash requirements and available capital.
Any business is run with an objective to make profit. Unless there is a profit motive, there does not exist any reason to run a business. This profit can be seen as compensation for the effort taken to run the business.
Understanding corporate actions such as bonus and stock split, among others.
Diversification spreads risk. This follows from plain arithmetic. If there are only 3 stocks in one's portfolio and one of them tanks, the overall portfolio takes a massive hit.
Short-selling can be a risky but a profitable venture.
An initial public offering or IPO is an offer of shares to the public by a company looking to list itself on a stock exchange.
The absolute price of a stock is no indication of whether a stock is cheap or expensive. Its valuation depends upon different measures, the most popular of which is the price to earning or P/E multiple.
The best strategy is to buy stable stocks with proven track records and hold them over long periods.
You could call up the broker’s office and place your order. Alternately, you could place the order online through the broker’s website.
A guide to buying and selling shares through a stock broker.
When you open a trading account you will be given a choice of segments—cash (shares), derivatives (futures and options), commodity and currency. Stick to the segment you understand well