The Science of Stock Market Investment - Practical Guide to Intelligent Investors

by Chellamuthu Kuppusamy

What should we do if we don’t want to see ourselves in a similar situation? 1. Avoid Z group stocks. If we already hold some companies from Z group, then we should get rid of them. That does not mean that other groups are filled with sanity. 2. You should independently and prudently assess if the company and its industry would have a good future (at least 3-5 years). Otherwise, get out of those scripts. 3. Should analyse the profit pattern for at least 5 years in the past. Then this profit trend should be benchmarked with the market leader in that industry. If there are any major fluctuations try to figure why and what went wrong where. Most importantly, the reason for relative performance of the company’s operating margin with that of the leader should be studied. 4. Investors should be alarmed if there was continuous worker unrest or customer dissatisfaction. 5. An analysis is to be made to check whether balance sheet had improved in an on-going basis. 6. Ask this question. Is the company surviving with a single customer or spreads the risk by diversifying sources of revenue? 7. You should study if the promoter holding has increased or decreased for at least 5 years. By this approach, you can smell if they have gradually reduced their exposure and still prepare to completely dump their holding? 8. Is the company propelled by a single visionary leader or it possesses an able second level management team? 9. Are there shareholder grievances or complaints?...