How to select a good stock for investment? If you know the answer you will be reaping all profits and no loss. There are several methods of selecting a good stock . The history of the company, its geographical location, position or rank of the company in the respective industry, its financials, the promoters and their holding percentage all are important while choosing a company’s shares.
Investment Analysis Portfolio Management Solutions Manual
History of the company includes, when it was originated, has it recovered from the initial teething troubles, is its products maintain standard quality well accepted by the market etc. Geographical location is important because any political turmoil or disturbance can adversely affect its progress. Besides knowing the condition of a particular industry in which the company functions, its rank in it also is very important. A strong company in a weak industry is ideal selection since when industry progresses, it gets outside support and our selected candidate is sure to gain much. When considering the financials, we may thoroughly study its balance sheets for the current as well as preceding years. We should look into its operating profit, margin, earning per share, PE ratio and also its book value representing its reserve. Also examine its dividend and bonus records to ascertain viability of holding it for a considerable period of time. Never touch a share if its trading volume in the stock exchange is very poor since we may get locked up to its holding unable to dispose it at time of our need. Finally, the role of promoters is also very important, as they are the persons who distribute benefits to the shareholders. Their percentage of holding also is to be considered as a low percentage makes them vulnerable and prospective candidate for take over.
History of the company includes, when it was originated, has it recovered from the initial teething troubles, is its products maintain standard quality well accepted by the market etc. Geographical location is important because any political turmoil or disturbance can adversely affect its progress. Besides knowing the condition of a particular industry in which the company functions, its rank in it also is very important. A strong company in a weak industry is ideal selection since when industry progresses, it gets outside support and our selected candidate is sure to gain much. When considering the financials, we may thoroughly study its balance sheets for the current as well as preceding years. We should look into its operating profit, margin, earning per share, PE ratio and also its book value representing its reserve. Also examine its dividend and bonus records to ascertain viability of holding it for a considerable period of time. Never touch a share if its trading volume in the stock exchange is very poor since we may get locked up to its holding unable to dispose it at time of our need. Finally, the role of promoters is also very important, as they are the persons who distribute benefits to the shareholders. Their percentage of holding also is to be considered as a low percentage makes them vulnerable and prospective candidate for take over. Hence what is wrong in selecting shares of a company, which pays more dividend than bank interest, provided it satisfies all other criteria explained above? A proper study is therefore a must before selecting a company’s share and adding it to our portfolio.
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