Vous êtes sur la page 1sur 3

Stocks to avoid (not to purchase)

1. Must avoid cheap second line stocks of previous Bull market or Current Bull market
2. Leading stocks of leading sector from previous Bull run
3. Stocks making new lows ( 52 week lows)
4. Market cap of stock relation to size of sector
5. Company making lot of acquisitions
6. Companies getting into unneccessary diversifications
7. Growth to repeated dilutions of equity & debt
8. Cyclicals that are performing too well
9. Relative valuation
10. Too much of show casing .

DRIVERS of P/E RATIO
1. Liquidity derivatives trading and inclusion in the index
2. Operating history
3. Cash flows
4. Entry barries
5. Sector leadership
6. Govt regulations
7. Tax payments
8. Is it Bull market stock
9. Return on equity
10. Size of the company
11. Popularity
12. Growth rate
13. Dividend yield
14. Debt to equity ratio
15. Sustainability of earning
16. Management pedigree
17. Loss making valuable subsidiaries


11. High P/E sustains it self for the entire period of high growth

12. More often than not the market acts in anticipation, as the fall in the stock price happens before the
companys growth rate actually droops. So a company might start to see its price come off even while
the profit growth might continue uninterruptedly for the next couple of quarters

13. Small market cap companies encounter time correction

14. TYPE MARKET CAPITALISATION
Micro cap Upto Rs 250 crores
Small cap More than Rs 250 crores and upto Rs 1,500 crores
Mid caps More than Rs 1,500 crores and upto Rs 6,000 crores
Large caps More than Rs 6,000 crores

15. Enterprise value minimum revenue Rs 100 crores, if potential exists rare and uncommon

16. Most mid caps shut down because of excessive debt and an inefficient management than due to
failed business plan.

17. MULTIBAGGERS FROM SMALL AND MID CAP STOCKS
1. SCALABILITY
2. SECTOR LEADER SHIP
3. PASSOINATE MANAGEMENT
4. NO NEED TO FOCUSS ON CHEAP VALUATIONS
5. CONSISTENT REVENUE AND EPS GROWTH
6. ILLIQUID AND UNPOPULAR
7. NO REGULATORY DEPENDENCE
8. PREDICTABILITY OF EARNINGS
9. FINANCIAL ANALYSIS
a) ROE
b) Infrequent equity dilution
c) Debt to Equity Ratio
d) Operating cash flow
e) Dividend yields

18. Companies with economic tail wind ever if medicon company
WHEN TO SELL
1. Opportunity cost
2. The present discounts the great future
3. Sector loses favour
4. Stocks to avoid
5. Selling for portfolio adjustments
6. Selling on market cap argument
7. CHANGE IN THE ORIGINAL THESIS EITHER DUE TO
a) Changing business fundamentals
b) Negative govt regulation
c) Management action
8. If stock is cyclical - - - - Not long term
9. SECULAR GROWTH STOCKS
a) Pricing power
b) Volume Growth
c) Problem of fixing price points
Examplethe 3 year 50% test
Consider stock like HDFC bank trading at a priceof Rs 630 to its FY 2014 EPS of Rs 35 which gives
P/E of 18times. Now if earnings double up in 3 years and stock falls to half the current price it would
mean that the stock at Rs 315 would trade at a P/E of 4.5 to its FY 2017 EPS of Rs 70 which appears
bizarre.
10. Maxim 6 stocks
11. Leverage of 10% maximum