'Guru Mantra' by Anil Singhvi to choose good shares | Teachers Day 2022 Special
On the occasion of Teachers' Day, Zee Business Managing Editor and Market Guru Anil Singh shares the' guru mantra' to choose good shares and become a successful investor.
Strong Management and Trusted Promoters
The management of the company should be strong. Management means those involved in the daily operations of the business. They should be professionals, have knowledge about the business and know how to drive it. The promoters are also important. There should be a combination between the promoters and the management. Promoters should not be like restructuring the business often or offloading their stake.
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He said even if you have purchased shares of a company at a higher price that has good management, you will get returns. The quality of the management is important.
Look For Dividend, Profits
On how to understand the performance of a company, he said that it is always better to look at the company's track record of 10-15 years. Look whether the management is giving regular dividends... look at its bonus track record.
When you invest in the equity market, you earn in two ways -- dividend and price appreciation. The value of shares of a good company will continuously increase. Understand the company, its management and its business.
You should look for good shares at fair value. There are situations like Covid when good shares price falls and also in a market correction. You should look at the overall market, sectors, and shares and then you will be able to buy good shares.
FIIs and Fund Houses Buying
If big investors are buying a stock that you have purchased, then it boosts your confidence. Definitely, they would have done extensive research, met the management and discussed their business.
There are many people who invest 100% in the equity market and there are also who stay away completely from the share market. These both investors are wrong. Likewise, companies having 100% cash or having 100% in debt are wrong. Among these two, companies with low debt are good choices to invest. But there are businesses where you can't grow without loans like infrastructure and others. The thumb rule is that cash should be more and debt should be low. The net cash flow should always be positive.
Pledging of Shares by Promoters
It is important to understand the purpose of pledging. You have to see whether the promoter is using the funds for personal reasons or investing in the business. Companies inform exchanges about the pledging, but they don't tell the reason behind this. this is your duty.
Understanding Sector & Industry
Whatever sector company you are selecting, you should look for the track record of the firm. Understand the growth prospects and the level of competition in the market.
Here, timing is important. You should know when to take entry and when to exit. Stay away from companies where frequent changes in government policies impact the business.
Import and Export
Import and export are other important factors. When you invest in companies involved in import and export, the chances are high of generating a good return. At the same time, the chances of loss also increase. If you are investing in IT companies and the US is in the grip of recession, then these companies will be affected. It is also important to understand companies' forex hedging. If the Rupee depreciates against the Dollar, then the financial health of companies will be affected.
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