Saturday, July 23, 2016

Become Your Own Stock Analyst


Courtesy : Investopedia 

Nobody asks you to become your own doctor or your own lawyer, so why should anybody ask you to become your own stock analyst? Some people like to take up cooking simply because they enjoy doing it. Similarly, there are people like Warren Buffett who enjoy the process of making investments. Therefore, if you are an investor who likes to be self-reliant, then you should consider becoming your own stock analyst. With a big question mark hanging over analysts' credibility, it is always better to learn the ropes. Read on to find out how you too can think like an analyst, even while sitting at home.

 Analysis Is a Process

It doesn't matter whether you are an investor looking for growth or value; the first step in thinking like an analyst is to develop a probing mind. You need to find out what to buy or sell at what price. Analysts usually focus on one particular industry or a sector. Within that particular sector, they focus on select companies. An analyst's aim is to deeply probe the affairs of the companies on their list. They do this by analyzing the financial statements and all other available information about the company. To cross-check the facts, analysts also probe the affairs of a company's suppliers, customers and competitors. Some analysts also visit the company and interact with its management in order to gain a firsthand understanding of the workings of the company. Gradually, professional analysts connect all the dots to get the full picture.
Before making any investment, you should do your own research. It is always better to research several stocks in the same industry so that you have a comparative analysis. However, the biggest constraint in doing your own research is time. Retail investors who have many other things to do may not be able to devote as much time as professional security analysts. However, you can surely take up just one or two firms in the beginning, to test how well you can analyze them. That would help you in understanding the process. With more experience and time, you can think of putting more stocks under your lens. 

The Best Place to Start Is Where You Are

Analyzing the analysts' reports is the best way to start your own analysis. That way, you save a lot of time in cutting short preliminary work. You can learn about your selected company simply by reading analysts' research reports. You may not blindly follow analysts' sell or buy recommendations, but you can read their research reports to get a quick overview of the company, including its strengths and weaknesses, main competitors, industry outlook and future prospects. Analysts' reports are loaded with information, and reading reports by different analysts simultaneously would help you in identifying the common thread. Opinions may differ, but basic facts in all reports are common.
Furthermore, you can take a closer look at the earnings forecasts of different analysts, which ultimately determine their buy or sell recommendations. Different analysts may set different target prices for the same stock. Always look for the reasons while reading analysts' reports. What would have been your opinion about the present stock, given the same information? No clue? Then move on to the next step.
 What to Analyze

For reaching your own conclusion, you need to understand the various steps involved in a stock analysis. Some analysts follow a top-down strategy, starting with an industry and then locating a winning company, while others follow a bottom-up approach, starting with a particular company and then learning about the outlook of industry. You can make your own order, but the entire process must flow smoothly. Any process of analyzing a stock would involve the following steps.

 Industry Analysis

There are publically available sources of information for almost any industry. Often, the annual report of a company itself gives a good enough overview of the industry, along with its future growth outlook. Annual reports also tell us about the major and minor competitors in a particular industry. Simultaneously reading the annual reports of two or three companies should give a clearer picture. You can also subscribe to trade magazines and websites that cater to a particular industry for monitoring the latest industry happenings.

 Business Model Analysis 

You should focus on a company's strength and weaknesses. There can be a strong company in a weak industry and a weak company in a strong industry. The strengths of a company are often reflected in things such as its unique brand identity, products, customers and suppliers. You can learn about a company's business model from its annual report, trade magazines and websites. 

 Financial Strength

Whether you like it or not, understanding the financial strength of a company is the most crucial step in analyzing a stock. Without understanding financials, you cannot actually think like an analyst. You should be able to understand a company's balance sheet, income statement and cash flow statements. Often, numbers lying in the financial statements speak louder than the glossy words of an annual report. In case you are not comfortable with numbers, no need to hesitate, just start learning as early as possible.

 Management Quality

Analysts also focus on management quality. It is often said that there are no good or bad companies, only good or bad managers. Key executives are responsible for the future of the company. You can assess company management and board quality by doing some research on the Internet. Tons of information is available.

 Growth Analysis

Ultimately, stock prices follow earnings. So in order to know whether stock prices would be moving up or down in the future, you need to know where future earnings are heading. Unfortunately, there is no a quick formula that can tell you what to expect for future earnings. Analysts make their own estimates by analyzing past figures of sales growth and profit margins, along with profitability trends in that particular industry. It's basically connecting what has happened in the past to what's expected to happen in the future. Making accurate enough earnings forecasts is the ultimate test of your stock analysis capabilities, because it's a good indication of how well you understand those industries and companies.

Valuations

Once you know about future earnings, the next step is to know about the worth of a company. What should be the worth of your company's stocks? Analysts need to find out how much the current market price of the stocks is justified in comparison to the company's value. There is no "correct value," and different analysts use different parameters. Value investors look at intrinsic worth whereas growth investors look at earning potential. A company selling at a higher P/E ratio must grow at a higher price to justify its current price for growth investors.

The Bottom Line

The ultimate goal of every investor is to make a profit. However, as the saying goes, not all roads lead to Rome. Never blindly accept what stock analysts have to say and always do your own research. Not everybody can be an investing expert, but you can always improve your analytical skills when it comes to stocks.

151 comments :

  1. Sir thanks for the valuable information.

    ReplyDelete
  2. Good Morning VP Sir!

    Nice article as usual..

    Sir your view on Usher, Capital First and Equitas please...

    ReplyDelete
    Replies
    1. Capital first ( CMP Rs.674) is the only stock I am tracking from the above list and it suggested as a must buy @ Rs.201( http://value-picks.blogspot.in/2014/07/capital-first-ltd-must-buy.html)

      Still positive on it .

      Delete
  3. Dear VP,
    IDFC Bank take over my city based Grama vidiyal MFI, like wise any listed MFI is potential take over candidate by any large financial institution? Your Satin Credit appreciated very well.

    ReplyDelete
    Replies
    1. Nowadays almost all listed MFI's are working even better than conventional banks , then why we need to think about take over of such companies by banks ?

      Delete
  4. Sir, your views on max ventures for 1 to 2 years.

    ReplyDelete
  5. Dear sir Thanks for the valuable knowledge sharing and the time spending for us.
    Please give your suggestions about
    1. Ginni filament
    2. Sandhesh
    3. Texmo pipes
    4. Spice island
    5. Euro ceramics.

    Thanks once again.

    ReplyDelete
  6. Replies
    1. Not aware of any listed company in the name ADJ Foods.

      Delete
  7. Sir what is ur view on the growth prospects of companies adani transmission, Berger paint and precision camshep

    ReplyDelete
  8. So when is our analyst getting back to action?

    ReplyDelete
    Replies
    1. Analysis is a continuous process but may not be in a position to share the result always.

      Delete
  9. @ValuePick - Whats your MMB profile? Are you posting there? May be I missed it? Is this your profile (below)? Also are you tracking Lycos? any views? http://mmb.moneycontrol.com/india/messageboardblog/boarders/76616c75657069636b

    ReplyDelete
    Replies
    1. Yes,above is my MMB profile link.

      My opinion about Lycos already expressed few days back below the previous posting.

      Delete
  10. Sorry it was adf foods. Please left us know your views on this co. Thanks

    ReplyDelete
  11. Sir, whats your view on Venus Remedies? Thx

    ReplyDelete
  12. Dear sir, Your views on Mold tek packaging, after its recievel of LOI for two plants only for Asian paints.....can it be a compounding story..like the paint companies...???

    ReplyDelete
    Replies
    1. It already turned as a 5 bagger . This stock suggested @ Rs.78 when its FV was Rs.10 and now trading around Rs.200 after FV split to Rs.5.

      Delete
  13. Dear Sir Sequent scientific any updates

    ReplyDelete
  14. Ur view on amtek metalyst forgings

    ReplyDelete
  15. Hi VP Sir, What's ur view about chemfab Alkalies. Posted very good result for last two quarters. Also management is going for expansion to increase capacity by 25%. Is it good to enter the stock at CMP or any correction. Your valuable views please

    ReplyDelete
  16. Sir, even though you are not sharing your detailed analysis, you are commenting positive things on certain stocks which is inspring us to buy those scripts, like alps industries, lakshmi energy and recently Amulya leasing. Hope you will continue these kinds of comments atleast.

    ReplyDelete
  17. Hi Sir

    Thanks for being active again and taking time out from your busy schedule. Wanted to know your opinion on Throcare technologies? They work on a different business model and are very cost attractive for consumers with an alright margins? I understand it's a new IPO but still if you could throw some light?

    ReplyDelete
    Replies
    1. Not a bad business but fully priced.

      Delete
  18. Sirji, how r you. Pls suggest/ view on softsol , vedwaag systema, olypia Ind.

    ReplyDelete
  19. Sir your view on omkar specialty chemicals. They are going to demerge vet API business

    ReplyDelete
  20. sir,
    what is your valuable view on Feddaral lyoads ???

    ReplyDelete
  21. dear vp sir ,makers laboratories not performing as per expectations? please share your views

    ReplyDelete
    Replies
    1. It moved upto 250% from suggested level and already suggested to book profit.

      Delete
    2. Sir what's ur view on alps Ind.Is it will be an turn around story.

      Delete
  22. Hello Dear VP,
    I am a long term investor. I analyse stocks by my own before investing (mostly I will start analyzing stocks which are recommended in Blogs or by brokerage houses). I hold the stock minimum one year to max many years. Once I convinced with the company’s business and fundamental, I will invest on that stock. If stocks corrects more than 25% I buy more shares as long as there is no change in company fundamental or no negative news on the company. I have few questions.
    1) Does Investor need to do technical analysis of the company before investing on that co share to be successful that stock investment?
    2) Is adding more shares when the share corrects considerably is too risky?
    3) I find some good stocks where promoter holding is high, low public holding. These stocks are traded very thinly. Is it risky to buy shares of the CO which are having low trading volume ?
    Thanks.

    ReplyDelete
    Replies
    1. 1) Depend on each investor's stock selection strategy.

      2)Depends on the reason for correction in stock price.

      3) Liquidity risk may be there.

      Delete
  23. dear sir,
    please your view on 1) puravankara Retail / real Estate,
    2) brooks labs Pharmaceuticals.
    thanks.

    ReplyDelete
  24. http://www.business-standard.com/article/markets/alphageo-a-stockpicker-s-delight-116072400820_1.html

    ReplyDelete
  25. Sir,you expressed your views on mindteck on mmb which is removed. I missed that and therefor want to know weather you are positive for future of mindteck?

    ReplyDelete
    Replies
    1. What I mentioned earlier in MMB that , the company is now looking into new generation verticals and one should track whether company succeeding in it by converting the same into business.

      Delete
  26. Hi VP Sir,

    I have few shares of L&T infotech allotted from IPO..Need your Valueable feedback.

    Thanks in advance.
    Ram

    ReplyDelete
  27. Dear VP Sir,

    You view on Veto Switchgrears pls? Thanks

    ReplyDelete
    Replies
    1. Only recently started to track , no comments as of now.

      Delete
  28. Sir your views on Magna Electrocasting?

    ReplyDelete
    Replies
    1. Decent company , sector should revive.

      Delete
    2. Excellent results - good time started for this company?

      Delete
  29. Dear VP ji
    Please share views on govind rubber
    And modern dairies. Thank you.

    ReplyDelete
  30. Hi Sir,
    Pls share your views on IRB Infra and Kirloskar oil engines.
    Thanks

    ReplyDelete
    Replies
    1. Tracking only Kirloskar oil which earlier suggested @ Rs.182

      Delete
  31. sir thank u so much for the great article...
    It would be of great help to know your views on Lloyd Electricals and Prathibha Industries?

    Thank You :)

    ReplyDelete
  32. Sir,
    What is your view on salzer electronics, HMVL and pioneer embroideries.

    ReplyDelete
    Replies
    1. We have already discussed about it , let they publish results to review.

      Delete
  33. Sir, do you track any of these stocks. DAICHI, CORAL LABS, TRIVENI GLASS, ORICON, GOOD LUCK STEEL, SHREYAN INDISTRIES, EMAMI PAPERS, ULTRAMARINE PIGMENTS, CHEMFAB ALKALIES and RAMA PHOSPHATES. Thanks.

    ReplyDelete
  34. Dear VP sir,
    What's your views about Denora India ltd?
    Please advice me sir.
    Take care.

    ReplyDelete
    Replies
    1. This stock suggested @ Rs.79

      http://value-picks.blogspot.in/2010/09/de-noraindia-ltd-will-it-be-multibagger.html

      which is currently trading around Rs.410 , neutral at CMP.

      Delete
    2. Sir,pls share ur views on pricol

      Delete
  35. Sir thanks,I got huge profits by buying of satin credit

    ReplyDelete
  36. Sir, Your views on Sterling tools

    ReplyDelete
    Replies
    1. This stock already returned almost 500 % from recommended level .Neutral at CMP

      http://value-picks.blogspot.in/2010/04/sterling-tool-improving-business.html

      Delete
  37. Please guide on amtek 🚗

    ReplyDelete
    Replies
    1. Not tracking any cos from this business group

      Delete
  38. Can i buy krebs biochem for my son.will it create wealth for him .please guide or give advice on some strong company

    ReplyDelete
    Replies
    1. Stock market is not like a bank FD to assure any return with a buy and forget policy in case of any stock. It should be monitored and take decisions based on developments periodically to optimize return.

      Delete
  39. Sir,

    Your view on Mandhana Industries is not shared, could you please share the same.

    ReplyDelete
  40. Sir,
    What is ur views on mangalam drugs ?
    It has posted consistence profits in the last few quaters

    ReplyDelete
  41. Hi sir, kindly share your view on walchand people, gujarat alkalin ,greenlam and ujjivan finance.

    ReplyDelete
    Replies
    1. Business is good @ Greenlam and Ujjivan , as an investment entry at current price is also important.

      Not tracking the other two.

      Delete
  42. Sir - do u track Indian Hume pipes & what is your view?

    ReplyDelete
  43. Pls share ur valuable view on godrejcp and concor..are you seeing any improvement in upcoming results of concor as i have invested from longtime and trying to know if performance is improving

    ReplyDelete
    Replies
    1. Not strictly tracking. Since you are a long term investor in it , you may have better understanding about the company and in a better position to judge it.

      Delete
  44. Pls share your valuable views on divislabs

    ReplyDelete
  45. What is your opinion about syncom formulation.(promoter continue selling)

    ReplyDelete
  46. Dear Sir, what is the reason behind subdued results of Panasonic Energy?
    Though I'm holding free shares only after booking part profits since your recommendation around 72.
    Would like to know your views so that I can continue to hold.

    Thanks again.

    ReplyDelete
    Replies
    1. Sharp fall in its top line is a cause for concern .as a share holder try to contact with company's CS to get a clarification in this matter.

      Delete
  47. Sir, are u still positive on ur old recommendation, DHP India ?

    ReplyDelete
    Replies
    1. Suggested to enter @ Rs.41 and exit around Rs.135 , as of now not tracking it.

      Delete
  48. Dear vp sir
    please share your view on ITD cementation pvt ltd

    ReplyDelete
  49. Dear sir,
    NCL industry result looks bad. What is your take on this?

    ReplyDelete
    Replies
    1. This seems in line with the general trend of AP/Telangana based Cement cos.

      Delete
  50. hello sir
    can we enter in bilcare at this level..? any fresh update??

    ReplyDelete
  51. Replies
    1. As of now not tracking any seed cos.

      Delete
  52. VP Sir, your view on GSFC.. this company has very good product line and order book but still stock price is ranging between 70-80.

    ReplyDelete
    Replies
    1. I am not expecting premium valuation for any company if pricing power is not there .

      Delete
  53. Sir, want your view on rain industries & Srei infra pls

    ReplyDelete
  54. Sir, your view on results of Enkei Wheels?.

    ReplyDelete
    Replies
    1. I believe company will perform well once there is revival in sector especially in countries to which company is exporting.

      Delete
  55. Hi VP,

    do you track cambridge technology enterprises

    ReplyDelete
  56. Sir matters highlighted by auditors of royal orchid hotels seems to be really negative for the company.
    What's your take on this??

    ReplyDelete
  57. Dear VP Sir,

    Amarjothi Spin result looks good. whats your opinion about the company if you are tracking?thanks

    ReplyDelete
    Replies
    1. This quarter was good , but consistency is the issue.

      Delete
  58. Helo vp sir.
    what is ur current views on Dion Global? Plz share ur views

    ReplyDelete
  59. Sir please comment on your recommendation(2010) arman financial services

    ReplyDelete
    Replies
    1. Arman financial Services suggested @ Rs.21 which is currently trading @ Rs.278 .Stock already returned 12 times and I am neutral at CMP.

      http://value-picks.blogspot.in/2010/05/micro-finance-part-2.html

      Delete
  60. Sir
    Want to know your view on Amulya leasing at CMP

    ReplyDelete
    Replies
    1. Started to discuss around Rs.150-160 , no change in view.

      Delete
  61. VP Sir,

    Your views on SKM results.

    Thanks

    ReplyDelete
    Replies
    1. Result is in line with expectation.

      Delete
  62. Sir please share your view on th latest result of magna electro casting

    ReplyDelete
    Replies
    1. Positive even in a not so good time for the entire sector.

      Delete
  63. can you give your suggestion on Shriram EPC?

    ReplyDelete
  64. Sir,
    Salzer is going to split ,plz provide your latest view.

    ReplyDelete
    Replies
    1. I think it is unnecessary . Its CMP is only Rs.250 and decent volume trading every day.

      Delete
  65. Sir, do you like any bank stock other than idfc bank?

    ReplyDelete
  66. sir, kindly update on nilkamal results , thank you sir.

    ReplyDelete
    Replies
    1. Already suggested to exit and not tracking thereafter.

      Delete
  67. Sir any change in your views on valiant communication?

    ReplyDelete
  68. Now can I enter skm for 3 years perspective?? Or wait ? Pls guide me VP sir

    ReplyDelete
    Replies
    1. Not expecting steep fall further but at the same time not in a hurry to jump into it.

      Delete
  69. Sir, any idea why SRS is crashing and creating new lows everyday? Is it the GST or the Crisil rating which was a downgrade to 'D' - do not touch. Is the management playing dirty games here? I am relatively new and had invested in SRS after doing some basic checks

    ReplyDelete
  70. your views on Veto switch and Capf results?

    ReplyDelete
  71. Sir ur view on associated alcohol

    ReplyDelete
  72. Pls.share your view.on bliss pharma

    ReplyDelete
  73. Sir,
    Your view on DIC India results.

    ReplyDelete
    Replies
    1. Valuation wise it is not over valued , but business is not growing as expected. Expecting range bound movement.

      Delete
  74. Hi Sir please share your view on Snowman logistics.

    ReplyDelete
  75. Vp Ji, aapka Lancor Holdings ke recent results pe kyaa take hai?

    ReplyDelete
  76. Dear Sir,
    Your view on Dwarikesh sugar after superb result.Understand that they hv good inventory at lower price.
    tks

    ReplyDelete
    Replies
    1. Not tracking any sugar stocks as of now

      Delete
    2. As of now not tracking any sugar stocks

      Delete
  77. VP sir, your valuable opinion please on Himatsingka Seide and Garware Wall Ropes.. Both have performed nicely in recent past but please tell what can we expect from them in future... Thanks.

    ReplyDelete
    Replies
    1. Positive on Himatsinka Seide , not tracking Garware Wall r.

      Delete
  78. Sir i had a great respect for you. But with SKM you entirely broken the trust. You often said buy a good business at lower price. What happen to that philosophy.

    ReplyDelete
    Replies
    1. Spiderman. This kind of allegation is not correct. Is VP good as his last stock performance (that too he gave buy at 60-70 and ask to sell out at 100% above current CMP)? If your trust is broken then you already had an option to not read him. That said it is your money and your are responsible for any actions/loss ... so please use right words ... You forgot Granules and many stocks like that which VP has give all of us ...

      Delete
    2. Dear PK.

      My SELL call was not a one word one, but I clearly mentioned the reasons for change in stand at that time.

      Delete
  79. RBL Bank's IPO oversubscribed 3 times on Day 2 ::

    In recent times, investors are more tending towards IPOs. As in recent past time, IPOs have delivered much better at the time of listing and counting better. RBL is one of those which is looking much stable and already over subscribed. As far as fundamentals are concerned, stock is fairly valued. Big names are associated with the IPO as well which is attracting more investors. The valuation is decent and investors are again expecting better returns at the time of listing. Stock could be better with 12 months holding as well.
    Visit: Multibagger stock ideas

    ReplyDelete
  80. Please share your opinion on Natco pharma at current market price

    ReplyDelete

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