Mining Precious Gems

Home > Other > Mining Precious Gems > Page 2
Mining Precious Gems Page 2

by Vinod Sreedharan


  tocks t hat actual y w

  arrant a

  ttention a

  nd

  the priority of focus.

  There are innumerable number of books, articles, blogs, videos available

  on the internet t hat claim t o and m

  ight even give y

  ou t he n

  irvanic w

  isdom i n

  this area. Rather than going through the motions re-churning the same

  (aka ‘reinventing the wheel’), I am going to highlight some of the good

  books and/or articles that I recommend in t his s

  pace a

  nd s

  ome o

  f t he more

  useful items/topics/criteria that need comprehensive focus and

  understanding while you go through the material.

  First up, here are some of the keywords, key c

  oncepts a

  nd k

  ey c

  riteria t hat

  needs focussed understanding. There are many more, it can be cal ed an

  ‘ocean in itself’, but nevertheless, it is always good to keep a handy set of

  core-criteria​ which are fit for purpose.

  Key Criteria Set - the ‘must know’ list!

  Note: Once more, ‘what, which, when, how, why’ are our friends.

  ● What is it?

  ● Which qualification (genre) it fal s under?

  ● How is it used/valued?

  ● When is it used in terms of context?

  ● Why is it important?

  Books

  Note: (** Book excerpts are the summary of books from books.google.com)

  ​ Fundamental Analysis for investors - Raghu Palat

  ​ “Fundamental analysis is an essential, core skil in an investor's tool-kit for

  evaluating a company on the basis of its track record: sales, earnings,

  dividends, products, management, etc., as wel as the economic and industry

  outlook. It is a value-based approach to stock market investing solid and

  prudent that typical y offers handsome profits to the long-term investor. Raghu

  Palat's book wil help you master the essentials of fundamental analysis. It

  clearly explains, with il ustrations, al the analytical tools of economic, industry

  and company analysis, including ratios and cash flow. It shows you how to

  judge a company's management and its products, and discover what actual y

  lies behind the figures and notes in a company's annual report. And, how to

  calculate the intrinsic value of a share.”

  One Up On Wall Street: How to Use What You Already Know to Make

  Money in the Market - Peter Lynch

  “Penned by the famous mutual-fund manager, Peter Lynch, this book elaborates

  the many advantages that an average investor has over professionals and how

  they can help them reach financial triumph”

  The Five Rules for successful stock investing - Pat Dorsey

  “Written by Morningstar's Director of Stock Analysis, Pat Dorsey, The Five

  Rules for Successful Stock Investing includes unparal eled stock research

  and investment strategies covering a wide range of stock-related topics.

  Investors wil profit from such tips as:

  * How to dig into a financial statement and find hidden gold . . . and

  deception

  * How to find great companies that wil create shareholder wealth

  * How to analyze every corner of the market, from banks to health care”

  How to Avoid loss and earn consistently in the stock market -

  Prasenjit Paul

  “Investing in high-quality business (stock) at the right price and holding them

  for a reasonable period is the only way for wealth creation.Written in an

  easy-to-understand and simple language, this book wil guide you on how to

  select fundamental y strong business, when to buy and sel stocks and above

  al how to minimize or avoid loss in the stock market”

  Everything you wanted to know about Stock market investing -

  TV18 broadcast

  “From financial planning and the impact of inflation on investments, from

  equity investing strategies like top-down and bottom-up investing etc to risk

  mitigation measures like value averaging, using market volatility, this book

  makes your knowledge on investing in stocks holistic.

  “Everything you wanted to know about Stock Market Investing” also goes

  beyond just explaining how markets work. With practical tips and

  il ustrations, axioms, action points and test questions it prepares you for

  your practical journey into the world of stocks.

  The book not only helps the investor comprehend the nuances of equity

  investing for wealth buildup, it also helps the investor understand macroeconomic aspects and their

  impact on businesses, how to respond in times of panic, how to avoid being the victim of stock market scams, and final y, how to compute equity investment returns before and after tax”

  Tutorials

  Zerodha Varsity - ​https://zerodha.com/varsity/

  ● https://zerodha.com/varsity/module/introduction-to-stock-markets/

  ● https://zerodha.com/varsity/module/fundamental-analysis/

  Investopedia - ​https://www.investopedia.com/university/

  ● https://www.investopedia.com/university/fundamentalanalysis/

  ● https://www.investopedia.com/university/al /fundamental-analysis/

  =========================================================

  Apart from the above there are innumerable number of video trainings that

  you can search and dig out from sites like YouTube etc which a

  re free a

  nd

  on MOOC sites like Udemy at a nominal cost. These wil cover a range o

  f

  fundamental and foundational aspects of Stocks, Equities and Investing in

  general.

  Unless you are a person who absolutely detests ​ text based learning and

  prefers video as a medium, I would urge you to use the above tutorials /

  books as a basis to build a solid foundation for screening.

  As a caveat, I find that m

  any o

  f the f ree v

  ideos a

  vailable o

  n t he i nternet a

  re

  many times incomplete, incorrect, misleading while not c

  onveying a

  h

  olistic

  end-to-end perspective in a way that the above books et al. do so

  effectively.

  Customizing screener.in

  In the previous chapters, we looked at t he b

  asic S

  creener.in a

  spects -

  user

  registration, logging in and basic views.

  Armed with enough fundamental foundational knowledge now, (you have

  gone through some of the material mentioned in the previous chapter,

  haven’t you!!!!), let us look at customizing screener.in for better effect.

  By default, when you log into screener.in and search for a stock, you get

  something like this:

  We see some baseline fundamental parameters on the displayed stock

  details. Things like Market Cap, Book Value, Price, P/E, ROCE, ROE etc

  show up. While these are obviously key point in time parameters of

  importance, there are many others that can be configured to display. With

  those showing u

  p, w

  e w

  ould h

  ave a

  m

  ore comprehensive h

  olistic f eel o

  f t h
e

  stock valuation.

  Steps to Configure and Customize

  Use the ‘Add Quick Ratio’ option (see the snip ahead) - just type what you

  want in it to configure.

  (Look at the same result now with ‘Debt to Equity’ parameter added via

  ‘Add Quick Ratio’ option - this parameter was not present in the previous

  default snip view)

  I am sure you the reader are now asking yourself - what are the available

  options? Is there a list ? Yes, there is -

  Go to screener.in main page and look at the bottom of the page below the

  ‘create a custom query’ box on the right side, you wil see an option

  “Show All Ratios”

  Clicking on the Show Al Ratios wil launch the Ratio Gal ery that has the

  list of al options categorised per the fundamental characteristic they fal

  under.

  So - now is the time to map your fundamental analysis knowledge to the

  real world application of the same.

  If you have gone through the

  book/tutorial materials in the previous chapter, you would have lined up a

  dozen or two of criteria that matters most with what your goals are in the

  stock market. If you haven’t done that yet, I would urge you to revisit the

  previous chapter and go through the m

  aterials recommended t here t o b

  uild

  a solid sound foundation for screening stocks.

  Use the most interesting set of criteria you have identified to customise

  your screener.in.

  An example fol ows……………...

  An example is snipped here……...screener view with custom configuration.

  This gives us a more holistic view of a stock’s fundamentals than the

  default view throws up.

  The Screens

  Here’s where the ​ ‘rubber meets the road’​. We wil use al the knowledge,

  information, wisdom we gleaned through this journey thus far to come up

  with multiple s

  creener s

  creens (

  queries) t o dig o

  ut g

  ood a

  nd ‘ ​ fit f or p

  urpose​’

  stocks from the stock market universe of choices.

  Further, we wil categorize them under different criteria brackets so we c

  an

  use them a

  ccordingly depending o

  n t he n

  ature of o

  ur o

  wn persona, a

  nd o

  ur

  respective context and goals for investing.

  Always remember, not everything wil suit everyone and there is real y no

  ‘​ one size fit al ​’ like most things in life and nature. To make an effective

  stock pick, we need to understand ourselves, our persona, our risk profile

  and context. We always need to be clear on our goal - ​return expectation

  and time/period of intended holding​. ​The more passive one w

  ants t

  o b

  e,

  the more conservative one should be on both of the aspects above.

  Further, the set of screens a

  nd q

  ueries b

  elow s

  hould b

  e c

  onsidered a good

  starting point to go ahead - experiment, play around, try o

  ut a

  nd c

  ustomise

  it for your own purpose. There i s r

  eal y n

  o ‘ holy g

  rail’ of s

  creener q

  uery t hat

  is ‘guaranteed’ to work under any context. If that were so, most market

  participants would be walking-posing “Warren Buffet(s)” just by showing up.

  Please use the queries not as a ‘holy grail’ or epitome of perfection, b

  ut a

  s

  a starting point to tickle your curiosity to dig, learn further and build a

  sustainable strategy.

  Another empirical suggestion to that e

  nd - o

  ne d

  oes ​n

  ot h

  ave t o put i n t ons

  of money into a testing model to gauge or help you measure the returns

  and efficacy of an approach. Use a customised query - just al ocate a

  smal testing amount into your chosen candidates based on the query

  results and characteristics you seek and let market provide you ‘​rich

  feedback​’ which you can use to adapt and rework.

  This keeps i t s

  imple -

  t his k

  eeps it evolving, p

  rogressive a

  nd a

  daptive. -

  t his

  keeps it humble.

  Tip: Use these screener queries as a ​ starting point​. Modify, tweak,

  adapt them as you deem fit and gain experience and feedback from

  the market.

  Growth oriented screens

  Rationale:

  These screens look p

  rimarily f or ‘ growth’ - t hat i s i ncreased o

  r c

  ompounded

  Profit, Sales, Margins, E

  PS e

  tc. o

  ver y

  ears o

  r q

  uarter o

  r YoY (

  year o

  n y

  ear)

  or QoQ (Quarter on Quarter) basis.

  Since, markets general y reward growth - especial y recent growth, one

  could look to find ‘in-vogue’, ‘in-momentum’, ‘in-focus’ stock candidates in

  the results. This could be used to invest in such candidates for a shorter

  time-frame or til such a time as the growth is a

  ctual y o

  bserved u

  nder t heir

  quarterly numbers churned out every quarter.

  ----------------------------------------------------------------------------------------------------

  1) Profitable stocks - recent periods

  Summary: Identify companies that have turned out healthy ​Profits and

  Margins​ in recent year(s) and quarter(s).

  Net profit > Net Profit last year AND

  Net profit > Net Profit preceding year AND

  Net Profit latest quarter > Net Profit preceding quarter AND

  Net Profit latest quarter > Net Profit preceding year quarter AND

  Net Profit preceding quarter > Net profit 2quarters back AND

  Net profit 2quarters back > Net profit 3quarters back AND

  QoQ Profits > 10 AND

  YOY Quarterly profit growth > 10 AND

  Profit growth > Profit growth 3Years AND

  OPM > OPM last year AND

  OPM > OPM preceding year AND

  OPM latest quarter > OPM preceding quarter AND

  OPM latest quarter > OPM preceding year quarter AND

  NPM latest quarter > NPM preceding quarter AND

  NPM latest quarter > NPM preceding year quarter

  Highlights:

  This screen uses Yearly and Quarterly Profits and Margins

  (both Operating ie OPM and Net ie NPM) to screen for good matching

  stocks.

  2) ​Growing in both Sales and Profit in recent periods.

  Summary: Identify companies that have turned out healthy ​Profits​, ​Sales

  and ​Margins​ in recent year(s) and quarter(s).

  Here, we add Sales figures i nto t he m

  ix w

  hen compared t o S

  creen 1

  ). This

  method is termed ‘progressive screening’ where y
ou increase the

  ask/demand in terms of quality and quantity

  Net profit > Net Profit last year AND

  Net profit > Net Profit preceding year AND

  Net Profit latest quarter > Net Profit preceding quarter AND

  Net Profit preceding quarter > Net profit 2quarters back AND

  Net profit 2quarters back > Net profit 3quarters back AND

  Sales > Sales last year AND

  Sales > Sales preceding year AND

  Sales latest quarter > Sales preceding quarter AND

  Sales preceding quarter > Sales 2quarters back AND

  Sales 2quarters back > Sales 3quarters back AND

  QoQ Sales > 10 AND

  QoQ Profits > 10 AND

  YOY Quarterly sales growth > 10 AND

  YOY Quarterly profit growth > 10 AND

  Profit growth > 10 AND

  Sales growth > 10

  Highlights: This screen uses Yearly and Quarterly Profits, Sales and

  Margins (both Operating ie OPM and Net ie NPM) to screen for suitable

  stocks.

  3) ​Historical and present Profit and Sales growing at and above 10%

  Summary: Identify companies that have turned out greater than 10%

 

‹ Prev