Dec 6, 2001|
Be cautious this time around....
That there is a rally in the stock markets is not surprising. What goes up must come down and vice versa. However, investors should be very cautious this time around.
The reason? Well a rising tide lifts all boats. Therefore, even a not-so-good investment decision makes you believe that you are a star stock picker. This belief ofcourse feeds on itself resulting in investors picking up stocks, which are backed by little or no fundamentals. In the case of such stocks, stories begin to do rounds - a large MNC is likely to pick up a stake in this company or that FIIs are large buyers in that company. Needless to say, such investment decisions end with a number of such investors losing their shirt i.e. when the tide runs out.
In a market that is attractively valued, investors should focus on building portfolios, which consist of fundamentally sound stocks. Look at this as an opportunity for buying great stocks at attractive valuations. Avoid the lure of once again participating in the infamous group of stocks. We all know how an investment strategy focused on investing in this group of stocks ended in year 2000.
Let's revisit some of the criteria's investors should look at before investing in a stock.
First and foremost, it is important that the management of the company enjoys a high level of credibility. This comes with an excellent track record, focus on shareholder value, a proactive approach and high standards of corporate governance among other things.
Second, ofcourse, is the company's financial performance and its ability to outperform its peers in down turns. Also, it is important that in this competitive environment, the company has taken or is taking measures to secure its position in the industry. With globalisation, it is imperative that the company compares well with global peers, rather than just its domestic peers.
Third, one must take stock of the operating environment of the company i.e. government policy among others. These issues can be very critical at times. For example, if an industry's survival is dependent on some import restrictions, its better to steer clear when one knows that the WTO guidelines will sooner or later level the playing field.
Ofcourse, the stock market rally has come as a relief to all investors after the prolonged sluggishness in the market. However, investors need to take steps to ensure that when this rally fizzles out, which it will at some point in time, they are invested in 'businesses' that continue to generate value for them.
More Views on News
Jun 10, 2017
Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.
Aug 19, 2017
Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.
Aug 18, 2017
Buying the index now will hardly help make money in stocks even in ten years.
Aug 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Aug 17, 2017
PersonalFN simplifies the mutual fund account statement for you.
More Views on News
Aug 7, 2017
The data tells us quite a different story from the one the government is trying to project.
Aug 10, 2017
Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.
Aug 8, 2017
Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...
Aug 12, 2017
The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.
Aug 7, 2017
Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...
Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement. LEGAL DISCLAIMER:
Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here
. The performance data quoted represents past performance and does not guarantee future results.SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.
Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: firstname.lastname@example.org. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407