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Showing posts with label Value Investing. Show all posts
Showing posts with label Value Investing. Show all posts

Thursday, July 6, 2017

Keys to Value Investing in Stocks

Value investing has never been a "hot" strategy for investing in stocks. In fact, no long-term strategy ever generates much buzz. This is partly because we live in a "quick-buck" culture that values immediate gratification more than a thoughtful approach to investing in stocks.

However, most investors are better off taking the long-term approach than trying to out trade the professionals.

There is always a loud chorus that proclaims buy and hold investing in stocks dead and a fool's game. No doubt if investors have the education, time and energy to devote to investing in stocks, a variation of buy and hold may produce better results.

That's just not the real world. Most of us have many other commitments on our time than we have time for already. Besides, some of the biggest fortunes on Dalal Street have been made with a long-term perspective and many of these fortunes were made with value investing as a core strategy.

What factors should you consider when evaluating a value stock? Before we answer that question, maybe we should briefly define value investing.

Value investing is finding a stock that is selling at a discount to its intrinsic value or companies that the market has undervalued for some reason unrelated to its economic fundamentals.

Benjamin Graham pioneered the value-investing concept and recognized the biggest flaw in the strategy: deciding what a company's intrinsic value is.

Margin of Safety

For this reason he always counseled for a margin of safety that provided room should your calculation of the intrinsic value be off.

This is important because the key to successful value investing is buying at the correct price. Graham's strategy called for a strict discipline on price, which included his margin of safety.

If he could not buy the stock at that price, he would pass.

Many modern stock pickers scoff at the rigidity of his system, yet Graham and his pupils, such as Warren Buffett, have made fortunes sticking to the strategy.

Financial Statistics

Here are some of the financial statistics value investors study, historical and forward:

• Price to book ratios
• Price to sales ratios
• Price to earnings ratios
• Price to cash flow ratios

The value investor will look for these ratios to be below the major indices benchmarks for a company's industry group.

However, let's be clear. Value investors are not looking for companies on the way to bankruptcy. They are looking for companies that have been beaten up by the market for no real fault of their own.

One of the ways you can make sure the company is on solid footing is to look at its financials.

Debt Ratios

Look in particular at its debt ratios (debt levels should be low) and look for good cash flow. A company with manageable debt and good cash flow is worth getting to know better, regardless of how the market is treating the stock.

How does a good company become a value stock? Several things can happen.

The company may not have a glamorous product. Some products just don't get much attention, but still must be produced, for example, those orange barrels you see on highway construction sites.

The growth prospects for the stock may not be high relative to other opportunities in the market. During the stock frenzy of the late 1990s, almost any stock that wasn't high tech became a value stock in comparison.

If a stock is selling at below Rs. 15 - 20, some investors think there must be something wrong with the company. This is an irrational response, but it happens.


Successful value investing depends on identifying a stock that is trading under the intrinsic value of the company and buying with a margin of safety in case you have misjudged the intrinsic value.

Sunday, July 7, 2013

Last 29 Hidden Gems Stocks Performance Update

Dear Reader,

We are delighted to share that our Hidden Gems service continue to rank on top in Google search engine with no. 1 position through out the year. Hidden Gems is one of the most admired service in small cap space and all credit goes to you, we would not have achieved this milestone without your continuous appreciation and support.

We never spent on advertisements over internet but you made this happen with your word of mouth publicity. If you search for "Hidden Gems stocks" which is one of our most admired annual subscription service or "Multibagger Small Caps", our website continue to features on top in Google search engine. We are thankful to all our readers.
We also take this as an opportunity to share the past performance of Hidden Gems released by our team during last 2.5 years. We always suggested our members to invest equal amount of sum in our Hidden Gems stocks on monthly basis. This strategy not only avoid taking extra exposure in couple of small cap stocks but also add diversification in your small cap stock portfolio. Another benefit is systematic investment plan which ensures that you save fix amount from your monthly income and invest systematically in our Hidden Gems every month.

Over a period of time, our equity analysts team will review the performance of previously released Hidden Gems and update you to continue nurturing the best seeds (well performing companies) and cut down the weeds (companies not meeting our expectations) to maximize returns on your investment.

Lets review how SIP approach have benefited our Hidden Gems members during last 2.5 years. Below is the table which illustrate % returns and value of Rs. 10,000 invested (every month) in Hidden Gem stocks vis a vis % returns and value of Rs. 10,000 invested in BSE Small Cap Index during last 2.5 years.

You can see that average returns of Saral Gyan Hidden Gems during last 2.5 years is 12.7% compared to -22.7% of BSE Small Cap Index. Investment of Rs. 10,000 in 29 Hidden Gems during last 2.5 years not only allowed you to save Rs. 2.9 lakh but also appreciated your investment giving overall profit of Rs. 36,830 on 2.9 lakh, making your total Hidden Gems stocks portfolio of Rs. 3.27 lakh. However, if you invested the same amount in Small Cap Index, you would be sitting with an overall loss of Rs. 65,800 with your portfolio value of Rs. 2.24.

In fact, actual returns of Hidden Gems are much higher than 12.7% as illustrated above. We have suggested partial profit booking at higher level in many of our best performing Hidden Gems and exit in non performing companies. Our team suggested 75% profit booking in WPIL at Rs. 430, full profit booking (100%) was suggested in Sri Adhikari Brother Ltd at Rs. 102, 50% profit booking was suggested in De Nora Ltd at Rs. 175, 50% profit booking was suggested in Cravatex at Rs. 700, 75% profit booking was suggested in Camlin Fine Chemicals at Rs. 24 and similarly exit was suggested in few of non performing stocks like National Plastic at Rs. 17 and Bharat Gears at Rs. 57 to protect capital of our members.

It gives us immense pleasure to share that 9 Hidden Gems out of 29 during last 3 years have given more than 100% returns to our members. During last 3 years, we identified below small caps which doubled investments in period of 8 to 15 months: 

1. Sri Adhikari Brothers (Maximum Returns - 161%, As on 07 July'13 Returns - 96%),
2. De Nora Ltd (Maximum Returns - 280%, As on 07 July'13 Returns - 69%),
3. Camlin Fine Sciences (Maximum Returns - 152%, As on 07 July'13 Returns - 52%),
4. Cravatex (Maximum Returns - 128%, As on 07 July'13 Returns - -13%),
5. WPIL (Maximum Returns - 151%, As on 07 July'13 Returns - 86%),
6. Wim Plast (Maximum Returns - 131%, As on 07 July'13 Returns - 93%),
7. Cera Sanitaryware (Maximum Returns - 261%, As on 07 July'13 Returns - 218%),
8. Indag Rubber (Maximum Returns - 113%, As on 07 July'13 Returns - 34%), &
9. Mayur Uniquoters (Maximum Returns - 126%, As on 07 July'13 Returns - 93%).

We are hopeful that we will continue to unearth best Hidden Gems from universe of small caps by doing authentic, indepth and unbiased research work and support our members to make educated investment decisions based on facts.

Thats not all, many of our Value Picks have outperformed market giving similar returns. Value Picks like Yes Bank, Indusind Bank, Godrej Consumers, Tata Coffee, Amara Raja Batteries, Indiabull Financials etc have given returns in the range of 75%-250% in period of 18-36 months.

Start Investing some portion of your savings in Hidden Gems & Value Picks of Stock Market to reap decent returns on your equity investments in long run.

Now you can avail huge discount by availing 3 year subscription (limited period offer, valid upto 15th July 2013 only) during Saral Gyan 3rd Anniversary celebration.  To know more about our 3 Year Subscription offer, click here.

Do write to us in case of any queries, we will be delighted to assist you! 

Wish you happy & safe investing!

Team - Saral Gyan