How to Find Undervalued Stocks - Kalpen Parekh, President @DSPMutualFund_in | ETMONEY
38 هزار بار بازدید -
3 سال پیش
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A stock is said to
A stock is said to be undervalued when it is being quoted at a price that is assumed to be below its true value. Needless to say finding and investing in stocks that are cheaper than what they are worth is not only rewarding but is also less risky to the investor
In this video, we shall present a simple and analytical framework on how even a beginner can discover quality companies at delicious valuations
Topics Covered:
00:00 Introduction
00:45 How to find undervalued stocks?
02:43 Step 1: Narrow the universe
08:49 Step 2: Identifying quality
11:56 Step 3: Never overpay
15:19 ETMoney Opinion
Read Article: https://www.etmoney.com/learn/stocks/...
A simple three-step process to identify undervalued stocks
👉 STEP 1: NARROW THE UNIVERSE
► Poor Earnings Quality
- Irregular Depreciation Charges
- Erratic Earnings Ratio
- Inconsistency Between Operating Cash Flow & Profits
► Cashflows Diverted From The Company
- Frequent Related Party Transactions
- Shares Pledged By Promoters
► Governance Issues
- Downgrades In Esg Or Shareholder Friendliness Scores
👉 Resources (📚 that prescribe ways to identify undervalued stocks)
► The Dhandho Investor : https://amzn.to/3mONPaG
► The Warren Buffett Way : https://amzn.to/3Jx0ngv
► The Intelligent Investor : https://amzn.to/3eGfsy6
► The Little Book That Still Beats the Market : https://amzn.to/3HvsKtN
👉 STEP 2: IDENTIFYING QUALITY
Quantitatively one metric which is a good definition for saying that these are good companies is ROE return on equity. So for every 100 rupees that a company's management or promoter has invested in the business, if that business can earn for example 15% and above threshold levels of return on that equity and over long periods across market cycles - then one can say that these are good companies which have good chances of survival across the market cycle. This ROE of 15% is in the context of the prevailing level of interest rates.
Other dimensions of companies are blended with ROE that does not need a lot of capital to run their business, and another filter is used for companies that don't have too much debt in their balance sheets or companies with very low debt and thus their debt to equity ratio is very low.
👉 STEP 3: NEVER OVERPAY
The primary reason for any investment being a great investment or a not-that-great investment is the price that we pay for owning its shares
Price to book is the variable that we look for to decide on a cheap or expensive valuation. If a company is currently trading at more than 50% premium to this fair multiple computed for this specific sector, then it is eliminated from our selection universe. By doing this we eliminate companies that are in the highest bucket of valuation for this particular sector.
So the role of value fund, the role of our discipline, the role of our quantitative technique is to ensure that we don't get carried away emotionally in terms of chasing the most popular companies in its sector, however good they may be from their business perspective. Here is where the discipline of keeping guard rails on valuation parameters becomes very important.
#ETMONEY #valueinvesting #Stockpicks
👉 To invest in Direct Plans of top Mutual Funds for free, download the ETMONEY app: https://etmoney.onelink.me/unJQ/5ca1a...
👉 Follow us on:
► Facebook: Facebook: ETMONEY
► Twitter: Twitter: etmoney
► Instagram: Instagram: etmoney_official
► LinkedIn: LinkedIn: et_money
In this video, we shall present a simple and analytical framework on how even a beginner can discover quality companies at delicious valuations
Topics Covered:
00:00 Introduction
00:45 How to find undervalued stocks?
02:43 Step 1: Narrow the universe
08:49 Step 2: Identifying quality
11:56 Step 3: Never overpay
15:19 ETMoney Opinion
Read Article: https://www.etmoney.com/learn/stocks/...
A simple three-step process to identify undervalued stocks
👉 STEP 1: NARROW THE UNIVERSE
► Poor Earnings Quality
- Irregular Depreciation Charges
- Erratic Earnings Ratio
- Inconsistency Between Operating Cash Flow & Profits
► Cashflows Diverted From The Company
- Frequent Related Party Transactions
- Shares Pledged By Promoters
► Governance Issues
- Downgrades In Esg Or Shareholder Friendliness Scores
👉 Resources (📚 that prescribe ways to identify undervalued stocks)
► The Dhandho Investor : https://amzn.to/3mONPaG
► The Warren Buffett Way : https://amzn.to/3Jx0ngv
► The Intelligent Investor : https://amzn.to/3eGfsy6
► The Little Book That Still Beats the Market : https://amzn.to/3HvsKtN
👉 STEP 2: IDENTIFYING QUALITY
Quantitatively one metric which is a good definition for saying that these are good companies is ROE return on equity. So for every 100 rupees that a company's management or promoter has invested in the business, if that business can earn for example 15% and above threshold levels of return on that equity and over long periods across market cycles - then one can say that these are good companies which have good chances of survival across the market cycle. This ROE of 15% is in the context of the prevailing level of interest rates.
Other dimensions of companies are blended with ROE that does not need a lot of capital to run their business, and another filter is used for companies that don't have too much debt in their balance sheets or companies with very low debt and thus their debt to equity ratio is very low.
👉 STEP 3: NEVER OVERPAY
The primary reason for any investment being a great investment or a not-that-great investment is the price that we pay for owning its shares
Price to book is the variable that we look for to decide on a cheap or expensive valuation. If a company is currently trading at more than 50% premium to this fair multiple computed for this specific sector, then it is eliminated from our selection universe. By doing this we eliminate companies that are in the highest bucket of valuation for this particular sector.
So the role of value fund, the role of our discipline, the role of our quantitative technique is to ensure that we don't get carried away emotionally in terms of chasing the most popular companies in its sector, however good they may be from their business perspective. Here is where the discipline of keeping guard rails on valuation parameters becomes very important.
#ETMONEY #valueinvesting #Stockpicks
👉 To invest in Direct Plans of top Mutual Funds for free, download the ETMONEY app: https://etmoney.onelink.me/unJQ/5ca1a...
👉 Follow us on:
► Facebook: Facebook: ETMONEY
► Twitter: Twitter: etmoney
► Instagram: Instagram: etmoney_official
► LinkedIn: LinkedIn: et_money
3 سال پیش
در تاریخ 1400/06/22 منتشر شده
است.
38,035
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