Peter Lynch once famously quoted “If you don't study any companies; you have the same success buying as you do in a poker game if you bet without looking at your cards”
Today one of the biggest problems that an investor and trader face is the ability to correctly do Fundamental Analysis of Stocks to evaluate the companies and businesses that they end up owning. This results in people ending up with setting unreasonable return expectations and targets from their stocks and more money has been lost with unreasonable expectations and irrationality than anything else.
We at SAMCO firmly believe in helping our clients How to Pick Stocks and hence we've created our Proprietary Ratings and Research Tool – SAMCO Stock Ratings – A tool that rates stocks and businesses on key business parameters and matrices and grades every stock rating from “AAA” to “Penny Stock”. Naturally, robust businesses with strong fundamentals are rated better and the rating falls as the quality of the business dynamics deteriorates.
So the next time you buy or sell a stock on your trading terminal, you'll have an Expert objective opinion on the quality of the company and you'll be better placed to make a decision.
We at SAMCO have analyzed the reported financial position of companies and scanned them objectively through the guiding torch of history's greatest legendary investors by rating the stocks on 20 all encompassing vital parameters, which effectively measure the underlying efficiency of business, growth potential, sustainability of earnings, constructive or destructive power of Leverage, ability to generate free cash flow, transparency amongst several others.
We at SAMCO are the only Discount Brokers in India who tell you what stocks you're dealing with which is necessary for every market participant to know in order to protect and grow their capital in the markets.
A word of caution though, we have rated companies on the character of the business and its inherent strength. The rating process doesn't account for price fluctuations and the existing market capitalization in the stock market since price by definition will fluctuate at all times but that would have NO direct bearing on character of the business and hence its value. We believe Warren Buffett's quote on price and value in this regards holds true "One of the biggest mistakes is to focus on a stock price instead of its value."
The SAMCO Indian Stock Rating Tool and its interpretations are as under :-
|AAA||Typically market leaders in their industry with significant pricing power and high competitive edge and growth opportunities with excellent underlying fundamentals and corporate governance practices|
|AA||Significant players in the industry they operate in and enjoy reasonable pricing power and moderate competitive edge due to their differentiation strategies or other entry barriers with good fundamentals and corporate governance practices|
|A||Typically operate in industries with good growth potential and enjoy moderate pricing power and competitive edge and have good fundamentals|
|BBB||Typically operate in industries with good growth potential and enjoy moderate pricing power and competitive edge however their business fundamentals and financials may be average as compared to other efficient peers. Their relative financial under – performance may be attributable to the cyclicality of the industry and/or management inefficiencies.|
|BB||Companies with little or no pricing power in the business and little to no competitive edge and operating in low margin businesses with average financials. Business fundamentals are largely affected due to the commoditized/cyclical nature of business and/or management inefficiencies.|
|B||Companies with no pricing power in the business and no competitive edge and operating in low margin businesses with average financials. Business fundamentals are largely affected due to the commoditized/cyclical nature of business and/or management inefficiencies.|
|CCC||Companies with no pricing power in the business and no competitive edge and operating in low margin businesses with poor financials. Business fundamentals are largely affected due to the commoditized/cyclical nature of business and/or management inefficiencies. Also affected by below average corporate governance practices of promoters/companies.|
|CC||Companies with no pricing power in the business and no competitive edge and operating in low margin businesses with extremely poor fundamentals and financials and corporate governance practices.|
|Penny Stocks||Companies with poor to no business fundamentals. In cases, companies may not be involved in any meaningful business activity. Very poor to no corporate governance practices and extremely poor to nil financial performance. Often are the highest value destroyers for shareholders.|