An investor's 3 best friends - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

An investor's 3 best friends

Mar 29, 2011

Operating in the Indian stock market since over a decade, we have had the opportunity to study various trading strategies. One strategy which tends to stand out is trading on the tip of a "friend". Now we don't have anything against listening to friends provided they give sound and logical advice. However, we have observed that in 9 cases out of 10, listening to friends is a sure shot way of losing one's hard earned money. So we have decided to introduce you to our friends. These friends of ours have helped us advise our subscribers how to make money and hope they can help you too.

Annual reports: This is the most important tool for an investor. The annual report is a comprehensive report of a company's activity over the course of the year. It contains details of the company's profit and loss account, balance sheet and cash flow statement. The annual report also contains discussion of the company's performance by the management as well as future plans for the business. One should take care to study the notes to accounts section to properly understand the company's financial reporting. But studying just the latest report for a company is a pitfall one must avoid. It is advisable to study not only the previous 3-5 year history of a company but also of its major competitors to gain a perspective of the industry a company operates in.

Websites: An often neglected source of information about a company is the company's own website. A company's website gives information on the company's history, its key personnel, products and various financial information and media reports which are helpful for investors. A company's website provides comprehensive information on the company at one place. This can help an investor understand the company better.

Local knowledge: Peter Lynch, one of the great investment gurus found many of his investments when not in office. He found them when he was out driving with his family or making a purchase at the mall. His advice to investors was "Invest in what you know". This is because he believed that an individual investor is more capable of making money from stocks than a fund manager. The reason behind this is that an individual investor can spot good investments in their day-to-day lives before Wall Street analysts can.

This view was further vindicated by Warren Buffett when he stated that there are all kinds of businesses that Charlie Munger and he don't understand. But that doesn't cause them to stay up at night. Instead they just go on to the next one, and that's what the individual investor should do.

What they mean is that one should know what one invests in. Investing in the stock market is just like putting one's money in a business. And like one knows about the business one invests in, one must also know about the business of the company whose stocks one buys.

Equitymaster requests your view! Post a comment on "An investor's 3 best friends". Click here!


More Views on News

ORIENT ELECTRIC Share Price Down by 5%; BSE 500 Index Down 0.0% (Market Updates)

Sep 18, 2020 | Updated on Sep 18, 2020

ORIENT ELECTRIC share price is trading down by 5% and its current market price is Rs 215. The BSE 500 is down by 0.0%. The top gainers in the BSE 500 Index are NATCO PHARMA (up 14.1%) and RAJESH EXPORTS (up 11.6%). The top losers are ORIENT ELECTRIC (down 5.3%) and ESSEL PROPACK (down 8.1%).

RAJESH EXPORTS Share Price Up by 11%; BSE 500 Index Down 0.2% (Market Updates)

Sep 18, 2020 | Updated on Sep 18, 2020

RAJESH EXPORTS share price is trading up by 11% and its current market price is Rs 509. The BSE 500 is down by 0.2%. The top gainers in the BSE 500 Index are RAJESH EXPORTS (up 10.7%) and DR. REDDYS LAB (up 10.9%). The top losers are DHANUKA AGRITECH and TCS (down 0.1%).

AVANTI FEEDS Announces Quarterly Results (1QFY21); Net Profit Up 14.1% (Quarterly Result Update)

Aug 28, 2020 | Updated on Aug 28, 2020

For the quarter ended June 2020, AVANTI FEEDS has posted a net profit of Rs 1 bn (up 14.1% YoY). Sales on the other hand came in at Rs 10 bn (down 12.6% YoY). Read on for a complete analysis of AVANTI FEEDS's quarterly results.

RELAXO FOOTWEARS Announces Quarterly Results (1QFY21); Net Profit Down 51.3% (Quarterly Result Update)

Aug 24, 2020 | Updated on Aug 24, 2020

For the quarter ended June 2020, RELAXO FOOTWEARS has posted a net profit of Rs 242 m (down 51.3% YoY). Sales on the other hand came in at Rs 4 bn (down 43.9% YoY). Read on for a complete analysis of RELAXO FOOTWEARS's quarterly results.

FORTIS HEALTHCARE 2018-19 Annual Report Analysis (Annual Result Update)

Oct 18, 2019 | Updated on Oct 18, 2019

Here's an analysis of the annual report of FORTIS HEALTHCARE for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of FORTIS HEALTHCARE. Also includes updates on the valuation of FORTIS HEALTHCARE.

More Views on News

Most Popular

Why do People Buy Stocks?

Why People Buy Stocks. The main reason people invest in stock is for capital appreciation and grow their money by buying stoc...

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

I Recommended this Stock over Page Industries because it's Relevant to Doubling Your Income (Profit Hunter)

Sep 7, 2020

Things are not often what they seem in the market and how you can take advantage of this.

The NASDAQ Whale Could Harm Your Portfolio (Fast Profits Daily)

Sep 7, 2020

The discovery of Softbank pushing up prices on the NASDAQ will cause volatility in the market. Stay alert!

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.


Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms