5 step approach for great stock pickingCrisp summary of the Warren Buffet way would act as an important guide to start with.
- Approach stock purchases as buying a business rather than just a stock purchase in the portfolio.
- Evaluate the true worth of the business considering the future earning potential
- The margin of safety is the real risk containment measure and not stop loss
- Turnaround seldom turns and therefore Invest in great businesses that are generating free cash flows
- Invest for the long term to generate inflation-adjusted superior returns.
What is Samco Stock Rating?Samco Stock Ratings can act as the first point of fundamental analysis and help individuals on the process of how to choose stocks to invest in. It is designed to help investors who have no information on how to do fundamental analysis in the Stock Market. Samco Stock ratings, is a meticulously done study on almost every listed stock of NSE by studying annual reports and consolidated financial statements and scanning them objectively through the principles laid down by legendary investors, resulting into every stock being rated from AAA – AA – A – BBB – BB – B – CCC – CC – PENNY. Just like credit rating agencies rate the creditworthiness of the company, we have rated the business worthiness or the quality of the company. It’s like if every student gets a grade in the school for performance, why shouldn’t a stock be rated similarly if an objective set of rating parameters are available. The rating can act as a guide or the second opinion on the stock, which the users can rely upon before deciding whether to buy or not to buy and it also, highlights the ideal conditions when the stock will outperform and underperform.
How Samco Stock Rating identifies and rates wealth-creating stocks?Identifying wonderful companies with an established track record is the key philosophy on which the rating system is devised. Rather than evaluating the company based on just stock price movements, which by definition will fluctuate at all the times, instead one should analyze the character of the business. We at SAMCO have scanned the stocks objectively through the guiding torch of history’s greatest legendary investors by rating the stocks on 20 all encompassing vital business parameters, which effectively measures the underlying efficiency of business model, earnings growth and its quality, ability to generate free cash flow, constructive or destructive power of leverage, transparency and governance amongst several other parameters, each being rated on a scale of 1 to 10 culminating into a stock being rated on a weighted average basis and getting a ranking from AAA to PENNY stock. AAA or blue-chip stocks being the best in terms of wealth creation possibilities and Penny stock being the worst in terms of wealth-destroying. [caption id="attachment_577" align="aligncenter" width="589"] SAMCO Stock Ratings - 6 Key Areas for Analysis[/caption]
Some important questions that every investor should ask before investing in a stock
- Does the business have the potential to grow?
- Is there a large market available for the goods/services of the business?
- Can the business withstand competition?
- Can the business generate 15% RoE consistently?
- Can the business grow its EPS at 15% consistently?
- Does the business have too much debt? Can it service its debt?
- Does the business generate free cash flows and are its earnings genuine?
- Does the promoter philosophy believe in wealth creation?
- Are too many of the promoters stocks pledged?
- Does the management allocate capital efficiently in business?