Things to be looked at while picking stock......

rajeevdesai.blogspot.com/2010/02/friends-i-am-seeing-lots-of-readers.html

Friends,
I am seeing lots of readers asking me about stocks.I am no Master nor an analyst.I do not know
anything about where people can rely on me and take decision.
My analysing of stock is RAW.It has no proper way to see things.
So, please don't rely on my opinion.I can go wrong in big way.
Another thing I would like to write here is , don't try to run after stocks which has a medium
growth.We want exponential growth.The topline should go up in big way and hence the results
should be seen in bottomline.
I again am writing some factors that one need to see, when they pick up a stock to buy or ask me
about it.

First see the P/E.....if the p/e is high and still you like that stock then try to see the growth and see
whether the earning will come more or not.
If the stock is already quoting at high p/e ,means say if eps is 4 and stock is quoting at 60 , then
the p/e is 15 and still you wants to buy it then you need to analyse whether the eps will go to 10-15
and hence stocks p/e will become less and hence will become a value buy......
Like for e.g take Thomas&Cook.It is 1 paidup and hence we can say that at cmp the stock is
quoted at 69.65 then 10 paidup it should be 696.50.So the p/e is already at 74.This datas one can
find at bse site on stock quote page.
Now Thomas Cook is having a NP of 10.22 cr in sep qr and that gave an eps of .49 for the qr and
hence p/e is high.Now what needs to be seen is whether the np will grow exponentially in next one
year?Like say, whether the np will quandrupole...like say will np will come to atleast 160 cr by the
end of the year?If yes, then it should have np of 40 cr in the qr of sep '10.
then only the eps will come to 2 and with market discounting at same p/e as of now.ie. 74 , then
only at 8eps for whole year Thomas cooks will be quoting at 600 .....Is that possible?Try to ask ur
self....
Now try to analyse whether that is possible?Second try to analyse whether market will still give
the same discounting of 74 p/e multiple.Now that depends upon the sentiment of market.If market
sentiment is bad , then Thomas cooks can have low discounting and may drop to 35 p/e and in
that scenario,the stock price will go down or remain stagnant.Moreover , the 74 p/e is quite high
for any Co .....that needs to be suatained for next 1-2 yrs.Ask yourself whether that is possible?
There is also less scope for p/e to go higher from 74! So on p/e front we can't expect it to
expand.....otherthing to note is if the p/e is low then we can also assume that p/e is also low so
that can also go up...but that is not the case in Thomas Cook...
So there can be no appreciation of money there.....
Thomas Cook being a MNC , market is giving high discounting.But if sentiments becomes bad the
discounting can get lowered and we lose.
If someone is betting for ST and try to earn some 25-30 or even 50 %return then it is OK.But then
one need not ask me about that as I never look at stocks for that much return.

1/2
I have usually refrained from buying stocks which are already splitted.If it is 1 paid up or 2 paidup
I rarely look at those with some exceptions like Rico Auto etc.
The reason is, if a stock is 1 paid up, it has to earn 10 times more to show that in eps then 10 paid
up stock.Do the maths yourself why I am saying so.Same goes for 2 paid up, they have to earn 5
times more then 10 paidup.
So the bottomline here is, when you pick the stock , try to see the product and market.Whether
the Co have big growth or not?That is very important. If not then ignore such stocks.
I track Himalayan Int since it was listed.Means 10-15 yrs back.It never performed as management
said.There is some restructuring that have taken place but it is in Mushroom products and they
export overseas.Now the thing one need to note is foriegn countries like USA, UK,Canada or
European countries , they are very quality concious.They take care of their people very much and
hence just one bad shipment and the order is cancelled and then it is hard to get a new
order.Once your image is tarnished it is hard to get it back.......These are the things one needs to
keep in mind while tracking stocks and that is the reason I do not track Himalayan Int....or Thomas
Cook ltd.One is having a very high P/E multiple and with sentiment of market becoming bad the
discounting can go down.While in Himalayan Int , the product is such that a small blunder can
cost co very dearly.......
So freinds, keep all these in mind and then go for it.....
And last but not the least,I can still go worng in big way and market can do something that I do
not expect.....so take your own call......anything can happen in market and nothing can be ruled
out.....
Try to read and understand each and every sentence of this POST properly. Try to understand
what I am saying and what I am telling to look at.......

2/2