Friday August 12, 2005
Investment fundas... In the last blogs, I was described about how to find value stocks. I managed to gather some more information on this when watching classroom program on CNBC TV18 channel. Thanks to CNBC TV18 team for doing good job.
Importance of safety :-
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* Buy cheap
* Keep eye on the scrip.
* exit when valuations are stretched.
* Buy and forget strategy doesn't work in stock markets.
Parameters of buying :-
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* Return on net worth
* Cash availiability
* Return on capital
* Good dividend yield
* Low PE multiple
Parameters other than PE
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* Capital efficiency of the business
* Ability to grow
* Margin in the business from time to time
* Effective cost management
* Of course good management
How to go about sell decisions
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* Just as you buy
* Margin of safety is less. For instance when the stock is overvalued. Remember good stocks will trade at high PE multiple and it's likely that they will be expensive all the time.
Remember, tremendous amount of discipline is required in stock markets. If markets are at all time high, its likely that they will create new highs. It's totally upto to you to digest the profits and your greed level when you like to encash the money out of market. Another point is that you must buy/sell in small chunks. Try to average out buy/sell orders.
(2005-08-12 22:22:42.0)
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