How to choose the best stocks?

This article is all about how to pick the best stocks. Before getting into the topic it is advisable to know about the types of stocks in the stock market. There are Growth and Dividend stocks. Based on the objective of your investments, you must decide whether you need dividend benefits or long-term growth while making an investment in stocks. Growth stocks are further classified into Value stocks, Cyclic stocks, and Thematic stocks.  Similarly, each stock can be sub-categorized and even penny stocks are also available in the stock market. The stocks with a value of below Rs.20 are said to be penny stocks. Infosys, ITC, and Tata Motors are examples of value stocks. These are considered as the protection stocks in the portfolio when there is a fall in the market. In this pandemic, some sectors like the pharma sector have been bombed. The pharma stocks include Aurobindo Pharma, Sun Pharma, Cipla, Cadila are the stocks that have created a cyclic trend in the market. Dish TV, Indian Overseas Bank, and Vodafone India are examples of penny stocks. You must do basic research before choosing a stock in the stock market.

Here is an example of a dividend stock which is Bharat Petroleum Corp Ltd (BPCL). It has declared Rs.58 as dividend per stock. If you are investing Rs.1,00,000 and the share price is about RS.470 then you would get 213 shares with a dividend value of Rs.12354 (213X58). It is twice the Fixed Deposit returns. There are various dividend stocks such as Whole India, Power Finance, Hindustan Zinc, etc. If your objective is to purchase dividend stocks then you can focus only on the dividend stocks to make investments.

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Fundamental stock research
Before making an investment it is good to learn. The learning process is very essential in the stock market. You must be updated about the stock performance, the reasons of about the rise and the fall of the market, etc. before choosing a stock it is good to see about 10 factors like Market Capitalization, Sales Growth of last 3 years, Profit Growth of last 3 years, Debt to Equity, Promoters Holding, Foreign Investments, Earning Per Share, Price to Earning, Return on Equity, Return on Capital Employed, etc. Hence before choosing a stock you must know about the market capitalization of the stocks, its sales growth for the last 3 years, and its profit growth for the last 3 years. Some people often choose to monitor the 5 years growth of stocks. It is also essential to monitor whether there is a debt in equity. There are certain good debts to say, if you are buying a house with a loan of Rs.40,00,000 this would not be said as bad debt. A company can get debt for its extension, Debt is healthy when it is under control. This is because repaying the interests for a lot of debts reduces the profit level of the company. It is better to have high promoters holdings along with the investor’s retail participants holdings. Along with this, there are some other factors like Foreign Investments, Earning Per Share, Price to Earnings, Return on Equity, Return on Capital Employed, etc are to be taken into consideration while choosing a stock. 

Pick stocks
You can make use of it to choose your best stocks. The best website for fundamental analysis is the screener. in. open the website and log in to it. Select the screen and you can browse sectors. For example, I have chosen the Alcoholic and Beverages sector which includes the companies that manufacture the alcohol. It contains all the details about several stocks such as current market price, P ratio, capitalization, dividend, and net profit. I will explain to you with a sample stock. I have taken Globus Spirits Ltd. as a beginner investor, before investing in the stocks, you must see the market capitalization which is RS.2707 Cr with the current price of about Rs.941 along with the high and low of the year as 942 and 150 respectively. It has increased more than 6 times from the low. The company has given about them. You can also see an overview of the company in a graph. You can select the graph for 1 year, 3 years and also for 5 years to see the performance of the company. The graph shows a rise from 158 in a 1-year graph. It has not been performed for the last 3 years. Some stocks check our patience much. In April 2020, if you have invested 1 lakh you might have obtained 10 lakhs. You can choose the stocks wisely. You can also check the pros and cons of the company on this website. It also provides a peer comparison about the competent companies. You can check the quarterly results. If you are planning for the long term, it is better to see the yearly results. In profit and loss, the sales increase from March 2019 to 2020, it increases from 987 to 1167. The earning per share increases as 8.45, 17.33, and 48.90. The compounded sales growth is on average 12% for 5 years, profit growth is about 70% for 5 years, and the stock price for 5 years is 65%. In balance sheets, you can check the reserves. It grew from 345 to 369 to 418 and also the borrowings were reduced from 230 to 181 to 142. You can also check the shareholding patterns that include the promoter holdings and foreign investments. 

On coming to the motive, you can select screens and create a new screen. You can apply your conditions in the search query based on which the companies are filtered out. If you have given market capitalization should be above 2000 Cr then 702 companies match this condition. We need only 10 to 15 stocks. You can include conditions like sales growth for 3 years should be on an average of more than 10 %, profit growth for 3 years should be of more than 10%, equity debt should be of less than 5, promoters holdings should be of greater than 60%, foreign investments holdings should be of greater than 1%, earnings per shares should be of greater than 10%, return on equity should be of greater than 10% and return on capital employed should be of greater than 10%. Based on these conditions only 40 stocks have been filtered out. I can choose 20 stocks from this to invest every 10 lakhs. You can ascend and descend in the stocks. If you are not a risk-taker, you can choose from this. And if you are a high-risk taker, you can choose market capitalization below 2000 Cr. on this condition, you would get only three stocks. On the above 40 stocks, you can see randomly to check the performance of the stocks. For example, aarti drugs, the pros, and cons are based on the condition we have given. I would choose the best 20 stocks from the 40 stocks. In the further sessions, I would explain every stock in detail along with its performance. You can also make use of this website and can spend hours and hours on it to attain knowledge. This is the best website for fundamental analysis. You also have to see technically such a level break out before picking the best stocks. You can contact us for further clarifications.