How to Pick Profitable Stocks?
Stock selection: In Indian Stock market, a disciplined stock selection strategy is very are important for an investor to grow his personal wealth drastically. Investors stock picking strategies depend upon some factors which includes the performance of company, market and industry trends, and share prices.
Let us simplify for you some of the best stock picking strategies based on different investing style.
Investing for Growth: In this strategy, you need to focus on fast growing companies, which are showing major increase in revenues and profits. This kind of investors who focus on this strategy intend on making money from the significant increase in the share prices of companies they decide to invest.
Returns from growth stocks: The returns from growth stocks are largely higher than that of other type of stocks. Though, the risks involved in this type of stocks are high as compared to others. This type of investors pick young and fast-growing companies, regardless of the expensiveness of these stocks, as the investors bet on the future growth potential of the companies. The fundamental idea of growth investing may differ from industry to industry and company to company.
Investing in Value Stocks:
This kind of strategy is different to growth investing mentioned above. These investors focus on stocks, which are trading below their intrinsic values. Value investors look into the fundamentals of the companies cautiously and they believe that the market undervalues these stocks.
Value investing: Value stocks are comparatively cheaper to the net asset value (NAV) of their respective companies. Value investing does not mean to pick a cheap stock, rather investing in undervalued stocks that have good growth potential.
GARP Investing Strategy: GARP (Growth At Reasonable Price) Investing Strategy, is a mixture of value investing and growth investing strategies. Through GARP investing strategy, an investor focus on stocks that are reasonably priced, at the same time possess robust growth potential. In other words GARP investors do not go for high growth stocks that have high risks or cheaply priced stocks, which are in problem. So, GARP investors avoid expensive high-growth stocks. The significant barometer for GARP investors is PEG ratio, which is PE ratio divided by growth.
Fundamental Analysis of Stocks: Using Fundamental analysis, an investor or analyst tries to estimate the intrinsic value of a stock based on fundamentals. Although this strategy takes more time and effort, it is appropriate for long-term investors.
Earning trends: With fundamental analysis, an investor try to understand the earning trends of a company and expected earnings in the future, rather than market sentiments. Further more than earnings and revenues, investors also focus on factors such as, ROIC (Return On Invested Capital), ROE (Return on Equity), cash flows and P/E ratio etc. Many Indian Business magazines are available with all of these factors for each company.
Using Technical Analysis to Pick stocks: Technical analysis ( chart analysis), is an investing strategy through which investors weigh the future price movement of a stock through past performance. Technical analysis mainly depends upon the demand and supply of the particular stock and trading volumes.
Intrinsic value stock: Technical analysis is quite contrary to fundamental analysis. Technical analysts do not bother much about the intrinsic value stock. Regardless of the advantages and disadvantages of the above-mentioned stock picking strategies, many investors are making millions irrespective of the strategies they choose. Always an investor’s choice of a particular strategy should depend upon his/her knowledge about the market, industry trends and growth potential of companies. Most important is investors devotion of time and risk calculation capabilities play major role in choosing a particular stock picking technique.
A mixture of above strategies to fine tune and pick the winning stocks works the best in Indian Stock markets.
Let us simplify for you some of the best stock picking strategies based on different investing style.
Investing for Growth: In this strategy, you need to focus on fast growing companies, which are showing major increase in revenues and profits. This kind of investors who focus on this strategy intend on making money from the significant increase in the share prices of companies they decide to invest.
Returns from growth stocks: The returns from growth stocks are largely higher than that of other type of stocks. Though, the risks involved in this type of stocks are high as compared to others. This type of investors pick young and fast-growing companies, regardless of the expensiveness of these stocks, as the investors bet on the future growth potential of the companies. The fundamental idea of growth investing may differ from industry to industry and company to company.
Investing in Value Stocks:
This kind of strategy is different to growth investing mentioned above. These investors focus on stocks, which are trading below their intrinsic values. Value investors look into the fundamentals of the companies cautiously and they believe that the market undervalues these stocks.
Value investing: Value stocks are comparatively cheaper to the net asset value (NAV) of their respective companies. Value investing does not mean to pick a cheap stock, rather investing in undervalued stocks that have good growth potential.
GARP Investing Strategy: GARP (Growth At Reasonable Price) Investing Strategy, is a mixture of value investing and growth investing strategies. Through GARP investing strategy, an investor focus on stocks that are reasonably priced, at the same time possess robust growth potential. In other words GARP investors do not go for high growth stocks that have high risks or cheaply priced stocks, which are in problem. So, GARP investors avoid expensive high-growth stocks. The significant barometer for GARP investors is PEG ratio, which is PE ratio divided by growth.
Fundamental Analysis of Stocks: Using Fundamental analysis, an investor or analyst tries to estimate the intrinsic value of a stock based on fundamentals. Although this strategy takes more time and effort, it is appropriate for long-term investors.
Earning trends: With fundamental analysis, an investor try to understand the earning trends of a company and expected earnings in the future, rather than market sentiments. Further more than earnings and revenues, investors also focus on factors such as, ROIC (Return On Invested Capital), ROE (Return on Equity), cash flows and P/E ratio etc. Many Indian Business magazines are available with all of these factors for each company.
Using Technical Analysis to Pick stocks: Technical analysis ( chart analysis), is an investing strategy through which investors weigh the future price movement of a stock through past performance. Technical analysis mainly depends upon the demand and supply of the particular stock and trading volumes.
Intrinsic value stock: Technical analysis is quite contrary to fundamental analysis. Technical analysts do not bother much about the intrinsic value stock. Regardless of the advantages and disadvantages of the above-mentioned stock picking strategies, many investors are making millions irrespective of the strategies they choose. Always an investor’s choice of a particular strategy should depend upon his/her knowledge about the market, industry trends and growth potential of companies. Most important is investors devotion of time and risk calculation capabilities play major role in choosing a particular stock picking technique.
A mixture of above strategies to fine tune and pick the winning stocks works the best in Indian Stock markets.
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