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Such companies are worthy companies to be invested in.
downloading demand of such companies, will always rise in the longer run, although, short term stock price fluctuations will be there, even for the best companies. We'll talk more on how to pick such rare worthy stocks more in detail later. Below terms are not parts of the criteria to filter and pick good companies to stay invested in.
I am only explaining them, as i would be referring these terms in the later sections. All values are available in websites like www. You just need to know what they mean. If you find this section confusing, just run through it fast. I am serious. It will all make sense when you finish reading this book. You can come back and read this chapter later, for more clarity. Market Capitalization A Company is divided into numerous shares and this number varies from company to company.
For example, Infosys is divided into over 57 Crore shares and each share price is worth over Rupees today. TCS has over Crore shares and each share price is worth over Rupees today. Market capitalization is nothing but the total value of a company Total number of shares multiplied by current share price.
As the share price varies from time to time, so does the market capitalization. One way to look at market capitalization is: But, TCS is the bigger company in terms of valuations or market capitalization. The common public holds only a very little portion.
Market Capitalization is also commonly referred to as market cap in short. Each company either makes profits or losses every year. Company's profits or loss financial statements, are announced every quarter every 3 months. The financial results are also consolidated on a yearly basis. Most companies follow April to March as their financial year Just like January to December is the calendar year.
July to Sep Quarter 2 Q Oct to Dec Quarter 3 Q Jan to Mar Quarter 4 Q Earnings per share EPS are nothing but, profits or losses made in the last 12 months divided by the total number of shares. So, EPS changes every 3 months, based on the financial results announced by the company each quarter.
If a company makes losses, its EPS turns negative. We know that TCS is divided into Crore shares. Land price in a City will always be higher than that of price of land in a Village. This is so wrong. Go to moneycontrol. Below is the snapshot of the page you will get. The first circle over You can see various tabs on the left. Financials is more important than the rest.
You can fill-out the form at http: It is not applicable to clients who open it directly with Zerodha. Watch our videos at www. The methodologies used are being discussed in this Book. You can find details about the nominal charges and more at http: This is charged at Rupees per Person.
More details at http: Debt or loans or liabilities is a killer. Just like us, companies also take loans, in earlier stages to expand and run their company. Very few companies execute their expansion plans and go on to pay off their debts. Such companies will start accumulating cash from profits they make every year, just like savings we build in our bank accounts.
On the contrary, debt will also pull profits downwards, as the company will need to pay interest on the loans or debt every quarter. If you think of a company as a ship, debt is like holes in a ship. The more the debt exposure, larger is the size of the hole in the ship. A company loaded with debt or loans is a sinking ship. When you invest in a sinking ship, you will sink with it.
While profits made by a company every year, tries to push the ship forward, debt tries to sink the ship. So, what is the right balance of debt and profits? Any company with debt lesser than 2 years of profits, is Yellow signal for me.
They have a few holes in it. But, they can always pay it back in 2 years, if they choose to use their profits, to pay off the loan rather than use it to expand their business.
Their business expansion will have to wait for 2 years. Any company with debt more than 2 years of profits, is Red signal for me. The more the debt to profit ratio is, the larger is the size of the hole in the ship. If you drive with red signal on, you are going to be dead soon. Let me give you some facts between and on 2 stocks One loaded with debt and the other with zero debt. Colgate Palmolive India is a zero debt company and made profits of Rupees Crores, in Share price of Colgate, has risen from Rupees a share in , to over Rupees a share in And, it will more likely grow as their profits grow every year.
Companies with debt would choose to use their profits, to either expand business or pay off debt. They cannot afford to accumulate cash balance. Companies with debt can't afford to acquire. When you want to compare two Zero debt companies, with cash equivalents, use the cash to market cap ratio.
For example: Infosys market cap is around Rupees 1,50, Crores now and has cash of Rupees 15, Crores. In a Zero debt company, being cash rich will more likely, tend to prevent the share price from falling down.
Infosys is more cash rich than Colgate. But, Infosys profit growth was slower than Colgate, between and As a result of that, Colgate share prices have risen more than Infosys, between and Brand value of a company is the next big factor. You will need to build some knowledge of companies and its brand products, to master the art of investing. It gives you the vision of whether the company will do well or not in future, which ensures share price rise.
And, good products with good brand value, will always churn more profits. You may not have heard about the company "Godrej Consumer Products", but you would have heard about their popular products like, "Good Knight", "Hit" to kill cockroaches, "Cinthol" soaps, "Godrej Hair dye" and many more. You may not recognize the company by name Pidilite, but you would recognize Fevicol, Fevistick and so on. When you download shares of such brand valued companies, you gain as their profits grow every year.
And, such few brand valued, Zero Debt companies, consistently rise in profits every year. And their share price, will always rise back from lows and keep going up in the long term. Now, there are companies with Zero debt and good consistent profit growth, with lesser or NO brand value or recognition. A lot of people, jump into downloading stocks, without understanding the brand value in it. You all will agree that, India is not a country short of rumors. Strong brand value will always kick away fear.
As an investor, you yourself will feel much better about investing in shares, of strong brand valued companies. Let me give you some factual examples: The company's revenues and profits have risen consistently, in the last 5 years.
Glodyne's share price was trading above Rupees levels, till late The share price has not risen back since then and has stayed down below Rupees , on bad economy. Investor confidence took a beating. Stock price fell from Rupees to Rupees in few days and to lows of within a month.
Due to strong brand value, investor confidence came back soon and stock price recovered back to Rupees levels, within a couple of months. Filter out and avoid companies without brand value. Scope for Growth in Future, is dependent largely not entirely on the competition a company faces. Lesser the competition, easier is the growth. You can even drill down to individual products, within the company and the competition for each of its products. Let me share few interesting facts.
They all make Cement. This growth in demand for cement gets split among the 22 companies There would be other unlisted smaller players too. Of course, a company with Zero debt and better management, would grab the opportunity, more than anyone else. There are over 30 listed companies in the IT sector. TCS and Infosys are strong competitors to each other.
There are only 7 listed companies here, led by Apollo Hospitals Enterprises. All others, are either loaded with debt or too small to pose a thread. There are only 6 listed players, dominated by Asian Paints. All others are too small or loaded with debt to pose a threat.
You may not have heard of Jubilant Foodworks, but might have tasted Domino's Pizza. With least competition and good future scope, I would definitely prefer to invest in Jubilant Foodworks.
Future Growth Prospects While competition is a major factor, scope for future growth comes in as a secondary factor. Bharti Aitel has Debt to Profits ratio of less than 2 and is a strong brand valued company. Bharti Airtel dominates the telecom industry. But their profit growth has saturated in India.
By now, every Indian above the age of 20 from Kashmir to Kanyakumari has a cell phone. This is the reason why, Bharti Airtel is increasing its presence outside India. Airtel is still a better stock, than many debt loaded ones. But it is not the next big thing.
Their presence is currently seen in a few places, only in major cities of India today. There's a lot more scope for growth, left in Cities, smaller cities and villages. It may take 10 more years for it to thrive in smaller cities, but when it does: And i have a strong belief that, smaller cities are the next big thing in India. Revenue or Profit growth of the past will not push share prices higher. But, consistency of past profit growth, reflects how good a company performed in the past.
They should continue the good work in the future too, which an investor will benefit from. If a company has been erratic in the past, its likely to be erratic in the future too. Revenues must have dipped a little in during recession, when people must have painted less. More the companies you avoid, better the investor you become. I now avoid There are over 6, companies listed on the Indian Stock Exchanges. If you filter the right 60 Stocks, you are well on your way to become a great investor.
Pick the top 10 stocks according to your view and diversify your investments equally on 5 to 10 stocks. Less than 5 would mean more risk and more than 10 will not be manageable, in terms of tracking them. These days, people who do management studies come up with too many terms and jargons just to confuse and convince people.
Stick to the basic rules. Same place, moneycontrol. Below is the snapshot for TCS. You can see the debt that TCS had in the last 5 years. Note that all these values are in Crores. You can see net increase and decrease in cash balance of TCS in the last 5 years.
When a company acquires another company, their cash balance normally decreases Unless they choose to take debt to pay for the acquisition. Before you proceed to invest, just make sure that the promoter stake in the company is clean. When I say clean, I mean that the promoter stake must not be pledged. If the promoter stake is pledged, it means that the promoter has pledged his stake in the company to a Bank as security and taken loans.
It is a major negative for the company and its investors. In most fraudulent promoter cases, the promoter stake will be pledged.
Satyam, KFA, Suzlon, Unitech are popular examples of promoter pledged, where retail investors wealth and hope has been demolished. Stay Away from such companies. Below is a snapshot of the page in moneycontrol for Unitech. Power of compounded returns, will be more and more as you give more time to it. The below table will show you the difference: I am sure all of them would rise in valuations Stock price.
Check them 20 years later and you will know the power of compounding. Summary Data as on Dec Stock Price per Share: They have cash in hand of Rupees Crores. They probably took debt to do favor to bankers or to leverage on tax exemptions. More cash in hand is always better.
More so for investors. Titan has been building customer base, for over two decades now. All of them were Titan Fastrack watches. He's the only branded watch available all over India, in the budget range of Rupees to There is no other competitor. Not to mention that they have outlets all over the world. India is becoming fashionable at a fast pace. Everyone at-least in cities wants to download Titan glasses, for eye sight problems. There's no watchmaker or jewelry maker with outlets setup all over India.
Titan is setting up outlets all over the world. They recently acquired a watch maker brand in Europe. They may go on to acquire more, expanding their outlet chain. With other parts of the world facing crisis, Titan will thrive. Titan currently sells hot in major cities of India.
They still have lots of space to grow in smaller cities of India, in the next 10 years. I am sure they will continue to grow. They have consistently made more profits than previous years.
Good cash in hand for a smaller company like TTK Prestige. Then you know its brand. They too are nearly zero debt, but their growth in the past has not been as great as TTK. Coming to future growth prospects, India's consumption growth is going up and up.
Specifically, Gas Cooker usage is on the rise. A lot of people still cook with firewood. The growth has been consistent and high. The share price has risen a lot as the brand value is on the rise. There's a lot more steam left in the next 10 years. It listed in secondary markets in Their first priority will be to expand with more outlets. So, they will have minimal cash in hand as a result of that. But, you definitely would have heard about Dominos Pizza.
They also operate in Nepal, Sri Lanka and Bangladesh. But Domino's and Pizza operate in two different price ranges, with Domino's being the cheaper one. That will definitely suit well for expansion and growth in India. Pizza Hut is not a listed competitor and as far as i see, there are more Domino's outlets than Pizza hut. Coming to future growth prospects, Dominos are mainly found only in Cities as of now.
That leaves tons of space to expand within India and other countries. All this could happen in the next 10 years. From the limited data we have, they have grown at awesome pace so far. You can consider net debt as Rupees Crores - Debt to Profit ratio is less than 0.
They can pay off their debt with just profits made in 6 months. Debt is at very safe levels. They have many more products which you may not recognize. You can logon to http: The word "Godrej" itself has a great brand value.
I am sure you will agree with that. Coming to future growth prospects, am sure India will be more haunted by mosquitos and cockroaches as time goes on.
People get white hairs at a younger age now and there will be more need for dyes. Personal care and things like beauty parlor products are on the rise and there's more room for growth. Growth Consistency of "Godrej Consumer Products" Growth consistency has been very good and is picking up more and more in recent years. Its rich in cash with Rupees Crores. As the company has accumulated cash, it has pushed share prices more than the profit growth in the last 5 years.
But they have minimal product line with all of them being popular, which epitomizes their quality. Crocin, Eno and Iodex are their products under healthcare category. If they erode, then they are not quality products anymore.
Future growth prospects: Well, their product line is little with each one outperforming. Even if they introduce one more new quality product, am sure that will also do great and push their profit line higher. They have accumulated cash which adds more value to investors.
Their track record is immaculate in the last 5 years. And all corporate buildings will prefer their buildings painted with the best paint. If you notice closely, most hardware shops are solely Asian Paints outlets. Their distribution channel is amazing. So are the varieties of colors they offer in their product line. They mainly cater to those who can't afford Asian Paints. I worked in HP till mid But they still painted their buildings so that it looks clean for business reasons.
Corporate buildings re-paint every 2 years if not more frequently. Edition Vinod Pottayil. Stock Market Beginners Guide. Trade and Grow Rich: Adventurous Journey to Successful trading.
Indrazith Shantharaj. Product description Product Description Its a book that will break the common mis-conception, that Stock Investing is gambling. Product details Format: Kindle Edition File Size: English ASIN: Enabled X-Ray: Not Enabled. Customers who viewed this item also viewed. Indian Share Market for Beginners: Vipin Kats.
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There was a problem filtering reviews right now. Please try again later. Kindle Edition Verified download. Gave me some idea about share market and the way investment may be done. Useful for long term investors gave a valuable suggestion about the investment and the valuable company identifying. One person found this helpful. Language used by the author is simple and to the point.
Many myths and half truths corrected and elaborated. The author has shown the right path to explore, research and finally invest in the Indian markets to one's fair advantage. Nice brisk easy useful and to the point. A bit costly but worth the money as it saves time, avoid unnecessary clutter. The simplicity in the language of book helps in understanding basics of stock markets.
Also Do's and Don't helps alot in decision making while choosing stocks or any investment decision. Seems like a thriller. Good Book.