• HDFC
• 08 Oct 2018
• Equity Product

HDFC, Tester

Investing in Stocks is something that many people find as a complicated thing to do, and that’s why they leave it in the hands of brokers & advisors. Those who try their hands at it are mostly not very certain while investing in a company. They might put their money in a stock just because a friend or a relative has done so, or they found a tip from some investment guru.
If you are one of those people, this post is for you.

 

How do we identify the right stocks to buy? This is one common question that most investors have. Well, a little bit of homework about the company whose stocks you plan to buy would help you make an informed decision. We have listed FIVE critical pointers that you should know about a company before you buy its shares.

 

1. Revenue: Study the growth pattern on the revenue of the company over the years. A company with a steady growth of revenue is the best option to invest as it can deliver higher returns in the future. You can find this information in Annual Reports on the company’s website or on any of the third-party websites that host financial data of the companies. Any sudden sharp increase/drop in the revenue pattern or a sequence of non-stop sharp rises or falls can be potential areas of concern for that company. You may want to keep yourself safe from such company stocks!

 

2. Industry Outlook: Study the overall outlook of the industry that your target company belongs to. What are the prospects? How is the industry performing as a whole? Assess the company’s positioning in the industry against its competitors. Sounds too complicated? Well, actually it is not. The related information is available on various forums on the internet including the official company websites.

 

3. Stock Price Movement: A company with a strange pattern of share price movement can be avoided as it means instability. Although most of the stocks have highs and lows in their lifetime, any stock moving in the opposite direction to the overall economic situation raises a red flag. There are cases where such stocks have yielded substantial returns for investors. However, it’s advisable for new investors to stay clear of such stocks.

 

4. Dividend Payouts: Dividend payouts is another measure of the stability of a company’s business. That said, companies that pay dividends too often or too much are also not favorable investment options. These could be signs of potential issues in business stability due to money not being put into the growth of the company (supposedly). You can use websites like ours to get the relevant information easily about companies whose stock prices you intend to track and evaluate.

Bonus Tip: Know more about the Top Management!

An expert captain knows how to come out of the rough sea. So, it is always advisable to know who is steering the ship. Look for the people on top (even the promoters) and study their reputation as Managers as well as Individuals. Great companies with high growth rates and potential have bitten the dust due to internal issues in the management team, personal feuds, scandals, or financial irregularities by the key executives. You can find out about the management on the Company’s ‘About Us’ page. For further research you can always resort to search engines and news mediums.
Keep in mind that you need not rely entirely on these factors to take a call. The purpose of these points is to help you gather as much information, analyze and build a clear picture of your target company. Remember, you invest your hard- earned money in stocks. So, it makes sense to put in some efforts to derive a knowledgeable decision about the company’s stock that you plan to buy.

Happy investing!