Many people feel that they lack the acumen or intelligence to invest in stocks.
For instance, Mr. Pinto, a leading advertising executive in Goa, invested most of his earnings in real estate. He has been planning to invest in stocks since 2008, but the ups and downs of the market made him jittery and nervous. When asked whether volatility was the reason for staying away from stocks, Pinto said, “Yes, that was the reason a few years ago, but today I’m confident but, frankly, don’t have the intelligence or patience to understand companies, numbers, finance, and all that.”
Pinto met Vipul, a close friend who has been working for a leading brokerage in Panaji. After hearing Pinto’s story Vipul showed him a few important resources, materials, and websites to help Pinto understand stocks and markets, and to help him make decisions.
Various websites provide different sets of data or information. Although you may get some information across all websites, know the best places to go for specific information is important. For example, stock exchange websites are the best and most reliable for price quotes. We review different information and discuss resources and websites.
The key things that investors should know include:
- What information should I look for?
- Where can I get such information?
- How is such information useful to you
Unlike in the old days, when people depended on brokers to execute transactions, individuals can trade and invest on their own today. One can trade or invest online or through the phone, and brokers act as facilitators or advisers to help you with transactions. Stock exchanges are the best place to check not only price quotes, but also various other pieces of information about the stock or the company.
If you want access to prices, trading details, company news, corporate actions (such as dividends and bonuses), and other details, visit www.nseindia.com or www.bseindia.com (websites of NSE and BSE). These websites provide delayed quotes but are the most updated and reliable for price information. An example of a screen shot is attached.
Remember that you can get this information from your trading account. However, if you just want to check current prices, you can quickly look them up on the NSE/BSE websites. When you are at work or at a meeting, you can still check prices online through these websites.
Company Financial Data
Company Websites: Most companies have websites where they publish financial statements such as income statements, balance sheets, and cash flow statements. The income statement or profit and loss account is released quarterly (every three months), and analysts and industry watchers closely track these quarterly results.
Financial Portals: Websites such as Moneycontrol, Valuenotes, and Reuters publish financial statements in a
standardized format. How are these websites different? These portals take the raw financial data published by companies and convert them into a uniform for easier analysis and comparison.
Brokerage Websites: Today, brokerage firms offer value- added services, including news, research, and financial data on most listed companies. Check out Indiainfoline.com or Angel Broking, which provide stock quotes and financial information.
Financial information serves as a report card of a company’s performance over a quarter, year, or other financial period, and provides an important measure of past performance and an indicator of future prospects. You will also get an idea of a company’s SWOT (strengths, weaknesses, opportunities, and threats.)
When you hold a company’s stock, you will receive a copy of its annual report, which is generally published every year after the close of the financial year. The annual report provides comprehensive information about the company and its performance for the past year.
If you did not get a copy of the annual report, you do not have to worry…it only takes a few minutes to access a copy. You Simply go to the company’s website and download the annual report, which is ready for you to read. You can always email and request a physical hardcopy, which is more convenient to read and keep on your bookshelf.
The annual report helps one understand the company’s comprehensive details such as the management team, products and services offered, past year’s financial performance, current year comparison with the previous financial year, auditor’s report, director’s report with a detailed commentary by senior management on the company’s performance and future plans, and other important information.
Most brokerage firms such as Indiainfoline, Motilal Oswal, and Kotak Securities, publish regular research reports with buy or sell recommendations. If you want to access research reports on a company, see http://www.valuenotes.com/research-analysis/research-analysis.php
Ninja Guru recommends www.insiderinvestments.in, which provides simple but highly effective reports on select stocks hand-picked by a team of experts, with interesting information based on facts, figures, and the latest market developments.
Why Research Reports? These reports are equally useful for rookies and seasoned investors because they combine different types of information on the stock, including the company’s financial performance, its valuation, financial ratios, product and services, markets for products and services, and competitors. These reports also tell investors which shares are worth buying or investing in and for how long, which helps set expectations or goals; for example, you can invest in South Indian Bank at Rs.22–23 level for the next three years (long term).
Coming back to our story, Pinto asked Vipul if he could buy a share based on the recommended buy price in research reports. Vipul stated, “research reports are not holy or sacrosanct… so take them with a pinch of salt.” Even experienced analysts can be slightly or significantly wrong with future estimates because these are only forecasts based on future expectations. In fact, a stock’s future performance is unpredictable; however, you can make an estimate based on various factors that we will discuss in upcoming steps.
Valuation and Ratios
As you begin to learn about different stocks and get comfortable with the process of investing, you will become familiar with important ratios and metrics used for valuation analysis. We discuss these metrics in detail in Lesson 10 and various websites publish ratios, such as ValueNotes.com, Moneycontrol.com, and Economictimes.com. In your spare time, go to these websites to familiarize yourself with ratios such as price-earnings multiples, price-to-book multiples, gross margins, returns on capital employed, returns on net worth, and others.
Ratios are useful when compare the ratios of one company with that of its competitors. For example, suppose research company A has a gross margin of 30% (gross profit divided by sales). If our competitor, company B, has a gross profit margin of just 15%, then we can say that company A seems to have a better pricing power because margins refer to the difference between selling prices and costs.
Some of the world’s best investors believe in the power of equities or stocks to create long-term wealth. The world’s great investing gurus recommend that investors stick to certain core principles and philosophies. One such principle is to invest for the long term. For instance, Warren Buffet used to say; “My holding period is forever,” indicating that he holds stocks for the very long term. In the next step, we introduce you to some of the principles or lessons that we can learn from successful investors. Although some core principles might sound like common sense, several principles require application of data, ratios, and sound metrics to arrive at intelligent decisions.
Please take time to visit different websites/portals discussed today, while we bring you some of the mantras and advice from successful investment gurus.
Now that you have decided to invest in stocks for the medium to long term, you are on the right track to becoming a Ninja Investor. It is time to get hands-on with your own demat/trading account, which will facilitate your investments in shares, gold ETFs, and other instruments.