The Equity Checklist

  Most investors are confused on when/how to take action in the stock markets that is when to buy/sell. Let me comprehend the same for you. (These actions are specific to Microcaps/Small Cap/Midcap Space) What to Buy: To determine what to buy, you can go through my extensive Equity Checklist which will help you in determining the right stocks under the Microcaps/Small Cap/Midcap Space. When to Buy: If you are convinced with What to Buy, then you need to decide at which price you would like to enter the stock. I do take help of technical analysis to help me make that decision (Techno-Funda Analysis). But it isn’t always necessary to use it. Consider these questions before making a Buy Trade: 1.        Are you willing to buy more if it goes down by 10%? 2.        Are you willing to buy more if it goes up by 10%? If it’s a yes in both the questions, then you are definitely ready to start investing the in the stock. (You are convinced with the stock and its ability to grow in

  The most confusing question for an investor is “When to Sell a Stock.” It is actually not the most discussed topic. Even brokerages suggest when to Buy a Stock with a Target Price but what if the Target Price is Not Achieved in the said Time Frame and what if the investor wants to Sell before the said Target Price or Time Frame. What does the investor do in that case? Let me list down the reasons why an Investor should Sell a Stock. The obvious reason to Sell a Stock would be that the Target Price given by a brokerage is achieved. The below listed reasons are applicable for Long-Term Investors especially investing in Mid-Caps/Small-Caps. 1.        Huge Fundamental Change in the Company: A Fundamental Change would mean that there is a Change in your Conviction that you had set when you first bought the company. For example: We had bought IEX around 160. On June 2nd, 2023 circular from Ministry of Power directed CERC to undertake the process of Consultation & Implementation of

  Now that you have already started investing in a stock with help of the Equity Checklist , it isn’t necessary that the fundamental conviction that you have in your mind will always remain true. It may change from time to time. So it’s necessary to keep track of the stock in order to check if the conviction remains in play or not. To keep track of the stock, you would need to do the following: On a Yearly Basis: -           Read the Annual Report. (Sections like Chairman’s message, Management Discussion & Analysis, Financial Statements & their Notes will help you in understanding how the company performed around the year and what does it plan to do in the future). On a Quarterly Basis: -           All companies are mandated to release results quarterly around the year. Keeping a track of results of the stock is important. They usually provide a YOY and QOQ comparison which also helps us in understanding if the company is growing or de-growing. (In the year 2021-22, 2

  The Basic Checklist : ü   Sector the company is present in? ü   How much holding the promoter has in the company? ü   How much of the promoter holding is pledged? ü   What is the 5 year Revenue CAGR? ü   What is the 5 year Net Profit CAGR? ü   How much has the Interest Cost Increased/Decreased in the last 5 years? ü   What is the Dividend Yeild? Is the Trend Increasing? ü   How much Debt has Increased/Decreased in the last 5 years? ü   How has the Trend changed in Debt/Equity Ratio? ü   How has the Trend Changed in ROE/ROCE? ü   Have the Cash from Operations been positive in the last 10 years? ü   Is the company been generating Free Cash Flow in the last 10 years? ü   Has the company been able to maintain a low Cash Conversion Cycle? ü   Is the product such which can replace imports? ü   Is it difficult to get Raw Material for the said Products? The Management Checklist : ü   What is the kind of Management? Family or Professional? ü   Have there been

  Finally, we are at our final checklist of our Investment Decision that is the “Buy Decision”. Foremost, you need to be convinced with all the other checklists that you have already ticked off and you are in a comfortable position to start your Investment Journey in the following stock. You need to decide at which price you would like to enter the stock. I do take help of technical analysis to help me make that decision (Techno-Funda Analysis). But it isn’t always necessary to use it. Consider these questions before making a Buy Trade: ü   Are you willing to buy more if it goes down by 10%? ü   Are you willing to buy more if it goes up by 10%? If it’s a yes in both the questions, then you are definitely ready to start investing the in the stock. (You are convinced with the stock and its ability to grow in the long term). One you are done making the Buy Trade, answer these below questions: ü   Are you willing to sell if it goes down by 10%? ü   Are you willing to sell if

  Following is the Kind of Stocks that you should Avoid: ü   Leading Stocks from a Leading Sector in a Bull Run. ü   Cheap stocks at a Later Stage of a Bull Run. ü   Small Microcaps with Untested Business Models. ü   Stock making New Lows Continuously.  ü   Market Capitalization Huge in comparison to Other Players in Industry. ü   Companies carrying out Unrelated Diversification through Acquisitions (Inorganic Growth) ü   Companies continuously increasing Debt/Equity.  ü   Companies in Cyclical Sectors.