Mutual Fund Training by Kumar Bhatia

                  

PPF vs ELSS Mutual Fund

SIP Mutual Funds - Rupee Cost Averaging

Basics of Mutual Fund SIP Investment

 

Liquid Fund vs Saving Bank

SIP Mutual Funds Break SIP in to Multiple SIPs

 

Best ELSS Mutual Funds 2016 

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9 Point Theory by Murali Krishnan to book profitable trades

Mr. Murali Krishnan, a pro Technical Analyst holds a view that continuous reading, study and exploring new ways of analyzing the price movements are the only parameters that helps you to book profitable trades. He says, to become a successful trader, one should follow these 9 point theory to understand the price movements at ground level. I have tried to list down our communication briefly in following points

1. Downtrend in price: He says, analyse a stock that has a long history. At least listed for 10 years or more. Stock should have observed a continuous down trend for minimum of one year and maximum of one and half year. 

2. Change of hands: He explains that there should be change of hands in stock usually at the end of downtrend. Is the change happening from weaker hands to stronger hands? If yes, stock passes the second test. For eg: If change of hands is from individual or HNI to mutual funds you can consider it as changing from weaker to stronger hands. 

3. Higher Lows: Next point to check is if the stock is making higher Lows for at least 3 weeks or more. 

4. Higher Highs: Similarly, the stock should also make higher Highs to get eligible for Buy according to this theory. 

                  

5. Two Parallel Lines: Stock should have experienced the up and down but is not able to break either low or high. This means there will be point from which stock takes a U turn for short period of time. When you try to join the high's and low's you will observe the two parallel lines are created. 

6. On Balance Volume: Another indicator that traders should follow very closely is On Balance Volume. It takes volume as a base and based on the change in volume, the relative price change predictions can be made. Negative and Positive volumes helps chartist to predict the change in price movement. If the closing price is higher than previous period closing price the volume is termed as positive volume and vice versa. Let us understand the formula of OBV

If the closing price is above the prior close price then: 

Current OBV = Previous OBV + Current Volume

If the closing price is below the prior close price then: 

Current OBV = Previous OBV  -  Current Volume

If the closing prices equals the prior close price then:

Current OBV = Previous OBV (no change)

On balance volume with the positive number will push the prices higher in near future

7. Relative Strength Comparison: In this theory, chartist will monitor and compare the strength of the counter with another counter, sector and index and try to predict the movement of the price. If the counter is holding strong in weak markets or stressful sector scenario, then that stock is to be looked at in deeper sense and once receive confirmation on other parameters, aggressive buying should take place.

8. Money Management: Money Management is the important and must indicator to be checked upon. Stop loss should be decided before entering into the trade. If the price hit the stop loss, keeping aside the emotions, the loss should be booked. We should keep the stop loss at 12% of the lowest bottom and any price below that takes your counter to the danger zone. 

9. Down Target: Though hitting the stop loss is the negative sign. However, we can take the said situation into our favor by shorting the trade. This is the reason, we should pre determine the down target as well, which can be utilized to take the decision in the stressed situations. It also ensure to minimize the loss by taking the trade as per the momentum.

Fundamental parameters like the ones mentioned below should also be checked upon to support your theory of profitability on the counter

1. Change in Earnings Quarter on Quarter and Year on Year is above 20%

2. Change in Annual Earnings is minimum 17% or more 

3. Frequent use of word New by company: A company should use 'New' during the year - say for example New Management, New Product, New Strategy, New Technology, New Client, New Market, New Strategy etc.  

You will find 14 points that every stock market trader and investor should keep in mind by Puneet Marwah an interesting read. 

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How to decide profitable trades with 15 minutes charts - Scalper Way

Scalping as the name suggest, is the fast paced, mind rattling and total exciting strategy used by traders in stock market. Scalping is one of the trading method intra day traders use to decide their trades. Scalper as defined by Investopedia is a person trading in the equities or options and futures market who holds a position for a very short period of time in an attempt to profit from the bid-ask spread.

Features of Scalping

1) Trading usually are for very short period say for example for few seconds to 15 minutes time frame.

2) Traders place many and frequent orders 

3) Main purpose of scalping is to get the benefit from the difference in bid and ask price

4) Scalpers have to be focused and be aware of the price and volume movements second after second

5) It usually suits the person who are impatient and have less tendency to wait for longer period

6) Quick decision maker - a must requirement to trade 

                  

It is the game of strong hearted person having ability to take quick action not only to book small profits in multiple traders but be capable of exiting from the position at the time when price hit stop loss

Scalper Theory: There are multiple strategies scalpers follow. One of them is average price and volume change strategy. Today we are going to learn the first lesson and the most important one that scalpers use.

Scalpers monitor below two pointers very closely.

1) The movement in the Volumes

2) Difference in change in price and average price for the selected time frame.

Based on the above parameters the call is taken and the targets are decided.

Keep in mind, you should traded when the counter is most active and during the busiest point of the trading session

 

Steps to follow:

1) In the given time frame, check the high and low price of the stock

2) AVerage of the difference in price

3) Check the volumes 

      a) If close price increase as compared to last period close price and the volumes are increasing - It suggests that buyers are more than sellers

      b) If close price decrease as compared to last period close price and the volumes are increasing - It suggests that sellers are more than buyers

4) Aggregate the buyers volume and sellers volume separately

5) If buyer volumes is more than seller volumes, it indicates the trend is bullish else the control is in bears hands

6) To decide the target, subtract the average price from the low price for bearish trend. In case the trend is bullish, add the average price to the high price and the said amount can be your short term target. 

Click here to view excel file that has an example of Bharat Financial. Data is of 22nd November, 2016 to 21st December 2016

Let us try to understand with the simple formula

Formula - Scalping Theory - Base Volumes

▶High - 100

▶Low  - 88

Therfore 

( High - Low)  / 2 

Or

( 100 - 88 ) / 2 = 6

So add result to Low Price 

ie.... 

6 + 88 = 94

Now - Volume 

Volume Increase Close below - 94 - Bear trap

Volume Increase Close above - 94- Bull Trap

Now Break Out 

Target Below - 88- Should be 88 - 6 = 82

Similarly

Target above 100 -  Is 106 

Let us now proceed to the video by Puneet S. Marwah on the Scalper Theory - Volume based

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Puneet set Gold target at 16180

While taking on the Scalper theory, Puneet said his favourite Study Managers, are CCI, Super Trend, OBV, MACDH and Resistance.

Gold is already in bearish trend and likely to remain bearish for next few months.

On the monthly chart we can clearly identify the resistance level of 32453 and support at 24487. Downtrend of 8293 point is observed in gold prices. Next support will be at 16180 levels. 

View the below video to understand how Puneet has decided the target price of 16180 for Gold.

                  

Below video shows the monthly technical chart of Gold 

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Understanding 'Day Traders' Psychology

Priyadarshee Goutam, an intraday trader uses maximum of 4 hours chart to 30 minutes to decide the trades to punch. He play in live market by analysing closely the candlestick formations on 4 hrs, 2 hrs, 1 hr and 30 minutes time period for point buying.

How he decides the trades?

• He says he will be bullish if a formation in 4 hours is of hammer for next 5 hours
• 2 hours doji will make him to go long or short for next 2 - 4 hours.

Entry Point

He usually enters trade by 9:20 am. At times, he waits for his point buying to avoid regrets of regression entering into market. Determining trend in first 5 mins is all predicted and predefined. His study includes everything mentioned below but not limited to

• Previous day open, high, low and close of a stock 
• Patterns for all time frames of previous day
• Moving averages - 20 / 30 / 50 / 60 / 80 /100
• Stockostics with fisher - Volumes with points
• Fibonacci with regressions and upon that elliot waves
• Trendlines 
• Volumetrics

                  

On 5 mins timeframe

5 mins only they can trade who are investing 40% more of their margins and that too you can lose in next 5 mins are you ready to lose % of your risking cash in mins? If no, be happy with your paper trades.

He further alarms by saying 5 minutes trading is very risky. It requires five to six hours study on the buddy stocks. Continuous efforts is what brings confidence in Priyadarshee to punch the order in first 5 minutes of market opening.

His Predictions

He had predicted one month before the nifty levels of 7900-8000 much before experts came on television and talking about those levels. He has a nifty target of 6350 based on the 5 years time frame and Fibonacci study. In the next 6 months he says 8000 - 8600 is a confusion zone. Once failed 9000 is what can be seen easily.

To the new traders

It is a myth that people learn from other traders. People learn by themselves. By analysing which study worked for them and which one proved terribly failed. He says practice is the only thing. Do the paper trading and note down why, where and when to do trade. If you can risk your money proceed with punching else keep paper trading till the time you understand the market sentiments.

Success Formula

Sleepless nights. 15-16 hours study. More than 50 pdf and 3-4 books reading in a week. Months and months of failure. Falling into depression. Changing strategies. Studying deeper and continuously has bought him to this level

Failures do happen

He too has failed. Patterns ditched sometimes, while other times flank movement occurred. You cannot control that, however you can control your emotions and avoid being aggressive to remain in trade. Exit before it is too late.

He says what we think is not always right. In market we are risking our capital on a probability. Thinking might take you wrong. However, trend is your friend. It will take you along in most of the rides. And in which they give you opposite shocks, leave them alone.

Quotes

If you never failed, you never really tried anything new

It is not about how slow you go, just as long as you don't stop

Closing comments

Put your hard money in market once you are successful 95% or more times in paper trading. Being in markets is like both heaven and hell. Both doors are open for you, which one to enter in is your decision. Take the chance with real money when you are well prepared and can handle the risk of losing money. Akhilesh another trader says, pressing the "Buy" button and watching the MTM losing even a Rs. 10/100 can bring negativity. Entering and exiting trade frequently is a sure recipe for disaster.

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Getting Started with Structuring Technical Charts

In second session of "How to become Pro Trader" Puneet S. Marwah explained how to structure the charts and its importance. Structuring the chart is one of the powerful & essential tool to determine the entry and exit points for a particular stock.

Process to structure the chart: Technical Charts is a pictorial representation of open, high, low and close of the particular time series for a stock. With the help of technical charts, we can view the movement in price of stock since inception at one go. In order to predict the future price movement of stock accurately, Puneet suggested to strengthen the skills to plot chart structures and develop the ability to draw the support and resistance as accurately as possible.

                  

In the above image, you can see the price movement from Low to Lower Low and from High to Higher High. It can be observed that the blue lines indicate support, intermediary support and resistance. It is easy to identify at what levels the stock can find support & resistance based on the past movement of stock prices. 

What to observe on charts?

a) Price Movements: How the price - open, high, low and close is developed during the particular time series. 

b) CCI Index: The Commodity Channel Index popularly known as CCI, like any other oscillators, helps in identifying overbought and oversold areas. CCI index is arrived based on the corelation between price of the stock and moving average.

 

c) Volumes: At the bottom of the chart the volumes are located

d) MACD: MACD or Moving Average Convergence / Divergence indicates the change in direction and identify the momentum duration basis of the stock price trend

Drawing the structures

Let us proceed to understand now few pointers to keep in mind while drawing the structures

a) Different Frequency: Depending upon the trade you wish to book, you should consider looking at the past performance for that frequency. For example for a monthly trade, plottng the structure on monthly chart will give you better view instead of looking at daily chart. It is good to develop a structure of a chart since inception and slowly moving to the shorter period of yearly, monthly, daily to hourly time series. Analysing the entire history will provide a deeper view to understand the support and resistance enabling you to take an informed decision.

b) Find out support and resistence and draw the trendline: Proceed with drawing the trendline starting with largest frequency available to the shortest one. This will help us in identifying the formation of the structure across different freqency and help us to recognize trade at the right price.

c) Pattern Identification: Once you are through with drawing the trendlines, check what patterns you chart is forming. Puneet discussed about W Pattern during the session which is long term bullish pattern. 

Chart Structuring of Tata Motors [BSE Code: 500570] Date: 7th November, 2016: W pattern is formed on the monthly chart. Technically, 432 will be a buy having stoploss of 412. Chart shows the resistance at 460-461 levels. On the weekly chart it is reversal pattern from the bottom is formed and small ascending traingle formation is appearing on the daily chart. 200 levels will be the best buy to accumulate the stock.

Disclaimer:This article is for information and trianing purpose only. It does not construe to be any investment advice to you. This article does not constitute an offer, invitation or inducement to invest in securities or other investments. This article has been furnished to you solely for your general information and should not be reproduced or redistributed to any other person in any form. This article does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual investors. Before acting on any advice or recommendation in this material, investors should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any investments. Past performance is not a guide for future performance, future returns are not guaranteed and a loss of original capital may occur. Trainer and/or its affiliates and/or employees may have interests/positions, financial or otherwise of over 1 % at the end of the month immediately preceding the date of publication of the training material in the securities mentioned in this article.

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14 points that every stock market trader and investor should keep in mind by Puneet Marwah

We trade to make profits. Profits are made when you enter and exit at the right price. Technical and Fundamental Analysis helps in determining the entry and exit points. Before driving into these studies, Puneet in session one of "How to become Pro Trader" explains 14 things to learn by each and every person who wish to book trade in market.

Understand the macros: First and foremost thing to do is understand the macros. It is important to know what is happening in the market not only at India level but the happenings across the world. Note down the events that are happening and are expected to happen in near future. List the advantages and disadvantages of each and every event. Note down the effects of such events on different sectors. Having a grip on the bigger picture will help in taking the calculative and correct decisions.

Trades happen when there is a momentum. Momentum happens only when there are events. First stage to understand the markets is to understand the events and the implications these events will have on your trades.

Understand the mindset of FII's & DII's, Fund Managers and Operators: Look at their entry levels by monitoring bulk and block deals. Take that as a support for your trades. When I say operator, I mean the one who is holding major chunk of the stock and his move will have an impact on the movement of the price.

                  
Domestic Institutional Investors has comparatively better hold on management than Foreign Institutional Investor due to their availability locally. FII’s rely on the material like reports and study material available online whereas DII’s has the advantage of meeting management at the frequent intervals and understand their mindset at every stage. Take advantage of the fighting between FII's and DII's to book the profitable trades 

Create buddy stocks: Don't be jack of all and master of none. Buddy stocks are the ones that you know and understand better. Go deep on those stocks. Study them to the last level. It will help you understand the trend and range of the price movements which in return will help you to decide the strategy of the trades.

Clarity of thoughts: Work on sectors that you understand better. The clearer your thoughts are, the more is the possibility of successful trades. Give more concentration on sectors and companies that you understand better.

Plan the strategy: Before entering any trade, have strategies on when to enter and exit. Note down the reasoning with proper facts and figures to have a substance to your strategy. Once the strategy is build go and execute the order confidently. People who become pro are not the ones who come in morning, monitors what others are doing and then decide their strategy. Instead they are the ones, who come well prepared on how the market will behave

Don't assume: Work on facts and figures. No one can predict the future. Avoid using the statements like "I feel". Have proper reasoning on why certain trade will or will not work. You need to have reasons and should be able to prove your study with facts and figures. Markets don't work on assumptions. Fundamentally companies need to be strong to remain strong all the times

Avoid Multiple Trades: Concentrate on limited trades. Don't ever overdo on trade because you think another trade will work more than the trade you are already placed. More the trades you do more are the chances of going wrong. Have limited trades with a bang on entry and exit point

Have patience: You need to show patience to get to your levels to trade. Once you have defined the strategy, wait for that strategy to arrive. Do not jump to trade just because you want to do the trade. Believe in your strategy and let market reach to your level and then execute the trade. Impatience will result in wrong as well as putting multiple trades which is not what Pro traders do. Trades which you stay in will give you profits. Learn the tricks to control your greed.

Search, Search and More Search: Technology has made available any and every information to you at just a click. Search and study continuously about your company, industry and the markets as a whole. If it is not feasible for you to study and you have appointed someone to manage your money, ask questions. Ask the reasoning behind every trade. It is your money and you have every right to know how and why it is invested in certain way. Be passionate and hungry always to know more. Develop the habit of reading, understanding, strategizing and concluding on the subject

Don't fall prey to spammers and stock tip givers: Stop believing people who says, I will make your money double or similar such statements. If they can work on your money to make you earn handsomely, why not they work for themselves? It is your hard earned money. Don't waste on such market tips people Instead of wasting money to pay fees to such market tip givers, invest in study material. Read, learn and then invest.

Work Hard: You can only earn if you are prepared to work hard. The more you practice, more are the chances of going right. Don't be lazy. Laziness won't show you results, continuous efforts will. Stock is rising doesn't mean that it is fundamentally good stock and will make you money. Identify the reasons and then book the trade.

If you wish to attend next session on Trading and Investing, click here to fill in your details. Write "Trading Terminology Blog" in reference textbox

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Rise and Fall of Nations by Ruchir Sharma

The Rise and Fall of Nations - Ten Rules of Change in the Post-Crises World - by Ruchir Sharma

I heard the story of a King who sends his son out to learn the rhythms of the jungle. On his first outing, against the din of buzzing insects and singing birds, the young prince can make out only the roar of the lions and the trumpet of the elephants. The boy returns again and again and begins to pick up less obvious sounds, until he can hear the rustle of a snake and the best of a butterfly's wings. The King tells him to keep going back until he can sense the danger in the stillness and the hope in the sunrise. To be fit to the rule, the prince must be able to hear that which does not make a sound.

1. People Matter: To access which nations are best or worst positioned to grow, look first at projections for growth or shrinkage in the working age population, to gauge the potential baseline gain for future economic growth. Just as important, track which countries are doing the most or the least to leverage whatever population gains they will enjoy. Are they opening the workforce to the elderly, to women, to foreigners? Are they taking steps to increase the talent level of the workforce, particularly by attracting highly skilled migrants? In a world facing a future of growing labour shortages, it's all hands - human or automated - on deck. 

                  

2. The circle of life: Even the most promising reformers tend to grow stale and arrogant with time. Crises forces a nation to reform, reform leads to growth andgood times, and good times encourage an arrogance and complacency that leads to a new crises. The circle of life captured broad, cyclical swings in the popular will, which have their greatest impact when new leaders have the charisma and good sense to translate a popular desire for change into concrete reform agenda. The most auspicious moment is the arrival of the right and fresh leader while the least comes under stale leader who hang on to power. 

3. Good Billionaires Bad Billionaires: The basic question: Is inequality threatening the economy? This is one of those issues that need to be addressed more by political art than by economic science. Inequality starts to threaten growth in part when the population turns suspicious of the way wealth is being created. If an entrepreneur is creating new products that benefit the consumer or building manufacturing plants and putting people to work, that form of wealth creation tends to be widely accepted. However, if a tycoon is making a fortune by cozying up to politicians and landing contracts from the government or worse by capitalising on Daddy's contracts, then resentment surfaces, and the nation's focus turns to redistributing rather than creating wealth. The process of growth and wealth creation is more likely to remain popular if the largest pockets of wealth do not come to dominate the economy. A healthy economy needs an evolving cast ofproductive tycoons, not a fixed cast of corrupt tycoons. 

4. Perils Of The State: Is the government meddling more or less? In general, and particularly in a period like the current one, when many governments have been intervening so aggressively, less is better. Government attempts to manage economic growth come in many and varied forms, but I watch three basic trends: change in the level of government spending as a share of GDP, coupled with an assessment of whether that spending is going to productive ends; the misuse of state companies and banks to achieve essentially political goals and the extent to which the government allows private companies room to grow. Less meddling and more founded government spending would make for better economic and political outcomes. Check to be made on whether the spending is going to productive investment or giveaways by the government, whether the government is using state companies and banks as tools to artificially pump up growth and contact inflation and whether it is choking or encouraging private businesses. 

 

5. The Geographic Sweet Spot: Is the nation making the most of its location? A country that is an open house especially in a closed neighbourhood can produce fabulous wealth. Nations that qualify as geographic sweet spots combine the pure luck of advantageous location with the good sense to make the most of it by opening their doors to the world, particularly to their neighbours and also making sure that even their own most remote provinces are entering the global mainstream. Taking full advantage of geography to crave out a commercial sweet spot is important for nation's long term growth prospects. 

6. Factories First: Is investment riding or falling as a share of the economy? Two kinds of spending drive any economy - consumption and investment - andwhile in most economies people and government spend more on consumption, investment is the more important driver of growth and business cycles. Investment spending is usually more volatile than consumption spending and it helps create the new businesses and jobs that put money in consumers pockets. It includes investment by both the government and private business in construction of roads, railways and. The like in plants and equipments from office machines to drill presses, and in buildings from school to private homes. The basic question for a nation's economic prospect: Is investment rising or falling as a share of economy? When it is rising, growth is much more likely to accelerate. 

7. The Price of Onions: An economy is in a sweet spot when inflation is low and GDP growth is high, especially when growth has recently started to take-off. A high rate of inflation is a cancer that kills growth, attacking the living organism of the economy through several channels. Inflation can be kept in control by opening to global trade, by having demand supply ratio in check and by having the inflation targets, provided that the central bank is prepared to increase the price of money and induce the pain necessary to control inflation if need be. In many countries, inflation has been as inevitable as death for only one lifetime. Before that, deflation was just as common. And deflation can be bad too as consumers start to delay purchases, waiting for the prices to become more cheaper. Consumer prices aren't the whole story, today changes in assets prices - stocks and houses - are just as important. In today's globalised world, in which cross border trade and money flows often tend to restrain consumer prices but magnify asset prices, watching the price of stocks and houses is as important as tracking the price of onions. 

8. Cheap Is Good: Does the country feel cheap or expensive? If the country has an overpriced currency, it will encourage both locals and foreigners to move money out of the country, eventually sapping domestic economic growth. A currency that feels cheap will draw money into the economy through exports, tourism and other channels that's result in boosting of the economy. The country will be poised to grow not when the currency start falling but when it has stabilised again at a cheaper and more competitive value. If the currency feels cheap and the economy is reasonably healthy, the bargain hunters will pour money in. If the currency feels cheap yet money is still fleeing the county, something is seriously wrong. To spot the beginning or the end of currency trouble in emerging markets, follow the locals. They are the first to know when a nation is in crises or recovery, and they will be first to move. The big global players mostly follow.

9. The Kiss of Debt: The critical question to ask about debt: Is private debt growing faster or slower than the economy for a sustained period? A country in which private credit has been growing much faster than the economy for five years should be placed on watch for a sharp slowdown in the economic growth rate andpossibly for a financial crises as well, because lending is running out of control. On the other hand, if private credit has been growing much slower than the economy for five years, the economy should be put on watch for a recovery, because creditors likely have cleaned up their books an are near ready to lend again. 

There are four basic signs of a stock market bubble: prices rising at a pace that can't be justified by the underlying rate of economic growth; high levels borrowings for stock purchase; over trading by retail investors; and exorbitant valuations. 

10. The Hype Watch: How is the country portrayed by global opinion makers? Investors focus on the future, while the news media focus on the present. The longer an economic boom lasts, the more credible a country's track record appears to the media and more warmly they embrace it as the economy of the future. The more this love deepens, the more alarmed I get.  Long runs of sustained growth are rare. The basic rule: the global media's love is a bad sign for any economy and its indifference is a good one. Countries that are cold in or decade do not necessarily stay cold the next. In any five year economic cycle, the competitive landscape can change completely. More often than not, countries are at the verge of disappearing from the list when the global media are most in love with them, and they are preparing to join the list when they are in the shadows. 

11. The Good, The Average, And The Ugly: A disciplined, balanced and timely perspective works better than any single metric. 

Good: The United States, Argentina, Peru, Mexico, Spain, Poland, India

Average: Colombia, 

Ugly: Brazil, China, Vietnam, Turkey, France, Russia, Australia

The best time to buy is 'when there is blood in the streets' and prices are presumably at rock bottom. 

Click here to read The Rise and Fall of Nations by Ruchir Sharma.

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How To Pick Stocks by Peter Lynch

Ask one question before investing - When will I require this money? If answer is near time future. Avoid investing in individual stocks. Invest only if your time horizon is 5, 10, 20, 30 years to develop wealth.

Give your good stories time to grow.

Investing is personal thing and not the community thing. You should be convinced on the story.

Research is not sitting for hours in library and doing complicated calculation on the subject. Instead research is working on the field that excite you. It is not necessary to be expert in all the companies. You should be expert in just few companies say 6 - 8 stocks and know well other companies.

Uncertainties, War, etc can take markets down. No one can predict the markets. You have to understand the market goes down. Once every 2 years market falls 10% and once in 6 years it falls 25%. So everytime markets go down, it is an opportunity to buy 6 - 8 stocks you have researched on.

Putting stocks into categories is the first step in developing on stories. We cannot have the blanket rule saying if stock increase 100% I will sell the stocks. Every stock behaves differently and we should act based on their category.

                  

For eg: You made 50% profit in two companies. First company is fast growing company while other one is slow growing company. 50% for slow growing company is the fantastic return and chances are its a time to sell it. While for a fast growing company, 50% is like a start and have still scope to earn more.

There are five categories - Fast Growers (Rapid Increasing Revenue in Rapid growing industry), Slow Growers (Slow growing company) Cyclicals (That behaves as per the movement in market Assets Based (Company which is in market since ages - 50 - 100 years and brand value is not reflected in balance sheet. Name of the company itself has huge value. However it is not possible to have the correct value to be reflected in the balance sheet Turn around

Categories are guidelines and not strict rules, so some companies don't fit into categories, while other can have more than one category. Most companies change categories at some point throughout their lifetime.

Use the categories as guidelines to develop and understand the story but don’t restrict yourself to ask questions while researching

Smaller companies have more potential to grow as compared to bigger companies. Though smaller companies have larger potential to grow at rapid rate but you should not dismiss larger companies. Excellent opportunities do exists in larger stories too.

Rapid Revenue and Earning Growth is the hallmark for fast growing companies

Fast growing companies only attracts the media. But there is nothing wrong in small companies. Choose the companies having growth potential. There is nothing wrong in slow growing companies provided you invest at the right price

 

 

Look for signs when you are researching the company's: Steady Earning Growth, Rising Dividends, room of expansion, good cash flows, low debt, strong management, company doing well, story is solid, addition of new products, expansion in different cities are the few parameters to look at.

Just don’t buy stock in hope. Wait for the reality and don’t jump on assumptions. Wait for the correct price to invest and have patience to hold.

Price of the stock will always follow the direction of earnings.

Just because company has done excellent in past and have been rewarding investors with dividends, it doesn't mean it will do great in future too. You need to have reasons of why it will do good in future too. New products in pipeline, expansion in different areas, research and development are few of the reasons that can help companies to maintain profits

P/E Ratio: Company selling $100 a share and earning $10 is Price Earning of 10. It is basically number of years your stock will take to earn your initial investment. Why look at PE: It tells you how much you are paying for a stock. Higher the P/E - it is expensive relative to company’s future earning. Lower the P/E - it is probably cheaper. Fairly valued stock is the one which is equivalent to the future growth earnings of the company.

Compare Stock P/E with it's own historical P/E, with it's peers and industry P/e. All things being equal, company having lower P/E and higher growth rate will be a good start for further study.

Dividend - Part of profit paid by the company to the shareholders. Stock Yield = Annual Dividend Payout / Current Price. Stock Yield in other words is return to your investment. Fast growers usually don’t pay dividend. They invest back all profits in business whereas slow growers pay huge dividends to reward and attract the shareholders.

Not always high dividend yield stocks will always be a good stock. You need to analyse, if company pays all of it’s profit in Dividend, it will surely have higher dividend yield. But will the company has strength to overcome the hard times without compromising the standards set by them of high dividend payments? From where the company will arrange cash when it is facing tough times? Make sure that your company can survive all times including of the time of set backs. The higher % of profits is paid in dividend - review further company’s ability of continuing the same in future too.

Difference between what the company owns (assets) and what is owes (liability) is Equity (also called as Networth).

Company should have enough cash to pay of its short term debt to be called a decent balance sheet. No debt and lots of cash is surely great balance sheet. Do further check if it is earning growth constantly growing or will the cash go off in near future due to lack of earnings?

Total Debt is more than half of the networth value of the stock - Beware and avoid the stock.

Debt in financial institutions, banks and insurance is usually higher.

Profit & Loss Statement: Over the time, all the money received by selling the goods and services is add add up and from that all the expenses that are incurred for selling those goods and services are deducted which results in net income / earnings / profit. Company whose sales is increasing and is reducing its cost - a company has growth potential.

To measure the cost effectiveness - check cost reduction and how it is changing relative to revenue: Profit Margin = Earning Before Tax / Net Revenue. Higher the profit margin, more the company has potential. Compare the profit margin with it’s historical data and with peers in the industry. Continuous growth shows a good potential to become a good story

Stock Picking is risk reward thing. You need to understand how much you will lose if your story goes wrong and how much you will earn if your story clicked.

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