Stock Market – The Game to Play
This blog is about understanding, what kind of research is required before investing in stock market.
Not today, for a very long time, world economy is driven by stock trading. Company performance, Government policies, Foreign Investment plans, World news, determines the price of the stock.
What do an Investor look into, before buying a stock of a company?
It’s generally the world news (happenings) which can create positive or negative impact to the company’s growth. Is it enough? I would say no! Because, it requires lot more than that.
First thing to do before buying or selling a share is to look at its trend for minimum last 5 years or 3 years in some cases. You should even look closer on its Quarterly performance and look even closer at its monthly or weekly performance. This will give you some confidence in buying or selling a stock. Is it enough? No, is the answer again.
Second aspect, you have to be up to date with the world news. Some policy change in USA, stock markets in all the countries gets affected. Crude oil price increase, oil price throughout the world gets affected. Demonetization in India, it affects lot of industries. Natural disaster, War: economy suffers. H1B Visa policy tabled by trump, all the IT Companies took a hit. One has to connect the dots of information around you to invest on the right company.
Third aspect, look at the balance sheet of the company year on year, look at the revenue growth, P&L statements, cash flows, dividend’s, look for positives or negatives. Look for trends within the statements, Companies growth plans, Companies vision. Even a smallest info will help determining the right investment. With all the numbers available, work on future analysis of the company. Look at return on equity, return on invested capital, etc. Even look at the sentiments of the company.
Fourth aspect, Companies Board members, senior management teams and their credentials and their success factors in the industry. As they are the decision makers, it is important to know the background of the core people and their success factors. This can help us in long term benefits. Infosys – Narayana Murthy, TATA Groups – Rathan Tata, Reliance – Ambani, etc. Many a times, people behind the company plays an important role in the growth of the company.
Fifth aspect, your gut feeling, which sometimes can go right for you, if all the planets are in favor of you. Gut Feeling without data support is quite dangerous, as we live in a world full of data.
Sixth aspect, know the commodity price (Commodity price depends on production, demand and supply). If the steel price increases/ decreases, it can affect the companies which are dealing with steel for manufacturing their products. If the Crude Oil price increases or decreases, it can affect the companies which are dealing with different types of oil.
If you’re planning for long term benefit, look for companies which gives dividend consistently on their shares.
Crude oil price increase = Vegetable cost increase, believe me, that’s the math.
If you’re interested and good in numbers, then the game awaits you. Are you ready for it?
This blog is for starters, once you gain ability to research at all the above aspects, you will start connecting it. Then the Game begins.
-Vinodh. PL
Strategic Planning Executive
Disclaimer: The views expressed in this blog are the writer’s and are not an indication of the company’s view, action or strategy.