When Disappointment Panda is Around. Buy Quality Stock like This! - Chart Of The Day 6 July 2018 - Equitymaster

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When Disappointment Panda is Around. Buy Quality Stock like This!
Jul 6, 2018

Talking about the Disappointment Panda in its current avatar of gatekeeping the corporate governance, the need of the hour is to stick to quality companies.

While the Disappointment Panda comes once in a while. We, at Smart Money Secrets, always try to recommend companies which are not susceptible to Disappointment Panda.

We believe, investing in quality companies (honest and efficient management along with strong business) in long run will help us fighting all kind of pandas and bears.

Sarvajeet wrote to you about one of the quality company we recently met. This company has not only got superior management, it has created a very niche business.

It is the lowest cost producer in the industry it operates. In fact, it's in-house R&D has helped in creating a competitive advantage over other players in the global industry.

And one of the metrics to look at quality in a business model is, growth in profits and its correlation with cash flow generation.

If we look at companies operating cash flow to net profits ratio for last ten years, it stood at 2.24 times on an average. Which we believe, shows the robustness of the business model and helps it qualify our quality filters.

While we like this company a lot, but we are travelling the time to see long history of company to be extra sure about its business model and competitive advantage it enjoys.

Stay Tuned.

Happy Quality Investing.

Data Source: Ace Equity, Company

This Chart Of The Day was published in The 5 Minute WrapUp - 'These Companies Are Rotten - Save Your Stocks Now!' - Disappointment Panda

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