THE ART OF SUCCESSFUL INVESTING IN STOCK MARKET FOR HIGH RETURNS
http://manishkumarjhunjhunwala.blogspot.in/2017/05/investment-in-stock-shares-of-listed.html
One of the biggest trading volume in any business is of the Stock Exchange .There are major 60 stock exchanges in the world with a total market capitalization of shares listed of USD 69 trillion .
Out of these 60 exchanges 17exchanges have a total market capitalization of shares listed on it of more than USD 1 trillion and their MCAP is equivalent to 87 % of the total MCAP of all exchanges put together.
The details of the major stock exchanges is as follows
The above table shows the major stock exchanges , MCAP in the descending order with the countries and the continents and the GNI ( GDP plus foreign earnings received ) and the ratio of MCAP to GNI .
This ratio was used first by Warren Buffett to see if the stock exchange is over or under capitalized.
So coming to the discussion on investment in the stock / shares of companies there are primarily following routes
1. Acquiring the shares during the pre IPO either at Start up stage or later but before IPO
2. Primary application through IPO
3. Purchasing through the Stock Exchange
Investing in shares requires a lot of discipline , patience , understanding of macro economic conditions , conditions of the industry and the company in which one wants to invest in.
The ideal way to invest in the stock market is following the principles of value investing as it is not possible to time the market .
A value investor should / can follow the following approaches for investing in the stock market
1. Estimating the Enterprise Value and Return : The investor identifies companies which are generating good profits and cash as a percentage of the market capitalization assuming if they have the option to buy the entire company at the current MCAP would it be a good business deal.
Say for example a company generates a net profit of around USS 10 million and Cash of USD 12 Million and the MCAP is USD 300 Million then the Return on Investment would be only 4 % which might not be attractive but if the MCAP comes down to say USD 50 Million the ROE jumps to 24 % it becomes a good buy.
However other factors like future profitability , business continuity , risk from competition etc. also needs to be evaluated .
2. Sum of the Parts Valuation : This is another method where the investor looks at the Balance sheet and P&L to add the value of running enterprise and adds Cash lying in Balance Sheet nd/or other investments etc to arrive at the valuation and if the MCAP is at substantial discount may decide to invest.
3. YIELD method : Under this methodology the investor calculated the dividend received and the capital appreciation divided by the initial capital utilized to find the yield and if the same is higher than interest rate s/he might decide to invest
4. Another method is to look at the investment in subsidiaries and value that the company might get if the same is sold and in addition the enterprise value and Cash and investment value etc.
5. Future Profitability In case of new organization looking at the business model and the resources and the business execution the investors assess the future potential and accordingly invest in these companies
6. Takeover Target : Sometimes the valuation , in case of Takeover targets , is calculated from the perspective of the value that the company taking over might buy it for basis the synergies and the growth projections that the company taking over can estimate .
7. Intangibles : Some companies like pharmaceuticals are valued basis the intangibles , and the revenue and profit that can be generated from these intangibles
8. Last but not the least the valuation is also done basis the new business or discovery of some product that the R&D tam of the company had discovered and estimation is made of the value of commercial exploitation from the same.
While these are the different ways of valuation some Golden rules for investments are as follows
Warren Buffett is arguably the world's greatest stock investor. He's also a bit of a philosopher. He pares down his investment ideas into simple, memorable sound bites. Do you know what his homespun sayings really mean? Does his philosophy hold up in today's difficult environment?
Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?
He's referring to the mindset of a sensible investor. Don't be frivolous. Don't gamble. Don't go into an investment with a cavalier attitude that it's OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn't go into an investment prepared to lose, and neither should you.
Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn't focus on being with or against the crowd.
The stock market will swing up and down. But in good times and bad, Buffett stays focused on his goals. So should we. (This esteemed investor rarely changes his long-term investing strategy no matter what the market does. Learn more in Warren Buffett's Bear Market Maneuvers.)
"The Intelligent Investor" by Benjamin Graham convinced Buffett that investing in a stock equates to owning a piece of the business. So when he searches for a stock to invest in, Buffett seeks out businesses that exhibit favorable long-term prospects. Does the company have a consistent operating history? Does it have a dominant business franchise? Is the business generating high and sustainable profit margins? If the company's share price is trading below expectations for its future growth, then it's a stock Buffett may want to own.
Buffett never buys anything unless he can write down his reasons why he'll pay a specific price per share for a particular company. Do you do the same? (They don't call him "The Oracle" for nothing. Learn how Buffett comes up with his winning picks; check out Think Like Warren Buffet.)
Buffett is a value investor who likes to buy quality stocks at rock-bottom prices. His real goal is to build more and more operating power for Berkshire Hathaway by owning stocks that will generate solid profits and capital appreciation for years to come. When the markets reeled during the recent financial crisis, Buffett was stockpiling great long-term investments by investing billions in names like General Electric and Goldman Sachs.
To pick stocks well, investors must set down criteria for uncovering good businesses and stick to their discipline. You might, for example, seek companies that offer a durable product or service and also have solid operating earnings and the germ for future profits. You might establish a minimum market capitalization you're willing to accept, and a maximum P/E ratio or debt level. Finding the right company at the right price - with a margin for safety against unknown market risk - is the ultimate goal. (Learn about the different kinds of risk that investors must face in Risk And Diversification: Different Types Of Risk.)
Remember, the price you pay for a stock isn't the same as the value you get. Successful investors know the difference.
How long should you hold a stock? Buffett says if you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes. Even during the period he called the "Financial Pearl Harbor," Buffett loyally held on to the bulk of his portfolio.
Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak and destroy portfolio appreciation for the long run.
#STOCKMARKET
#VALUEINVESTMENT
#WARRENBUFFETT
One of the biggest trading volume in any business is of the Stock Exchange .There are major 60 stock exchanges in the world with a total market capitalization of shares listed of USD 69 trillion .
Out of these 60 exchanges 17exchanges have a total market capitalization of shares listed on it of more than USD 1 trillion and their MCAP is equivalent to 87 % of the total MCAP of all exchanges put together.
The details of the major stock exchanges is as follows
The above table shows the major stock exchanges , MCAP in the descending order with the countries and the continents and the GNI ( GDP plus foreign earnings received ) and the ratio of MCAP to GNI .
This ratio was used first by Warren Buffett to see if the stock exchange is over or under capitalized.
So coming to the discussion on investment in the stock / shares of companies there are primarily following routes
1. Acquiring the shares during the pre IPO either at Start up stage or later but before IPO
2. Primary application through IPO
3. Purchasing through the Stock Exchange
Investing in shares requires a lot of discipline , patience , understanding of macro economic conditions , conditions of the industry and the company in which one wants to invest in.
The ideal way to invest in the stock market is following the principles of value investing as it is not possible to time the market .
A value investor should / can follow the following approaches for investing in the stock market
1. Estimating the Enterprise Value and Return : The investor identifies companies which are generating good profits and cash as a percentage of the market capitalization assuming if they have the option to buy the entire company at the current MCAP would it be a good business deal.
Say for example a company generates a net profit of around USS 10 million and Cash of USD 12 Million and the MCAP is USD 300 Million then the Return on Investment would be only 4 % which might not be attractive but if the MCAP comes down to say USD 50 Million the ROE jumps to 24 % it becomes a good buy.
However other factors like future profitability , business continuity , risk from competition etc. also needs to be evaluated .
2. Sum of the Parts Valuation : This is another method where the investor looks at the Balance sheet and P&L to add the value of running enterprise and adds Cash lying in Balance Sheet nd/or other investments etc to arrive at the valuation and if the MCAP is at substantial discount may decide to invest.
3. YIELD method : Under this methodology the investor calculated the dividend received and the capital appreciation divided by the initial capital utilized to find the yield and if the same is higher than interest rate s/he might decide to invest
4. Another method is to look at the investment in subsidiaries and value that the company might get if the same is sold and in addition the enterprise value and Cash and investment value etc.
5. Future Profitability In case of new organization looking at the business model and the resources and the business execution the investors assess the future potential and accordingly invest in these companies
6. Takeover Target : Sometimes the valuation , in case of Takeover targets , is calculated from the perspective of the value that the company taking over might buy it for basis the synergies and the growth projections that the company taking over can estimate .
7. Intangibles : Some companies like pharmaceuticals are valued basis the intangibles , and the revenue and profit that can be generated from these intangibles
8. Last but not the least the valuation is also done basis the new business or discovery of some product that the R&D tam of the company had discovered and estimation is made of the value of commercial exploitation from the same.
While these are the different ways of valuation some Golden rules for investments are as follows
Warren Buffett is arguably the world's greatest stock investor. He's also a bit of a philosopher. He pares down his investment ideas into simple, memorable sound bites. Do you know what his homespun sayings really mean? Does his philosophy hold up in today's difficult environment?
"Rule No. 1: Never Lose Money. Rule No. 2: Never Forget Rule No. 1."
Buffett personally lost about $23 billion in the financial crisis of 2008, and his company, Berkshire Hathaway, lost its revered AAA ratings. So how can he tell us to never lose money?
He's referring to the mindset of a sensible investor. Don't be frivolous. Don't gamble. Don't go into an investment with a cavalier attitude that it's OK to lose. Be informed. Do your homework. Buffett invests only in companies he thoroughly researches and understands. He doesn't go into an investment prepared to lose, and neither should you.
Buffett believes the most important quality for an investor is temperament, not intellect. A successful investor doesn't focus on being with or against the crowd.
The stock market will swing up and down. But in good times and bad, Buffett stays focused on his goals. So should we. (This esteemed investor rarely changes his long-term investing strategy no matter what the market does. Learn more in Warren Buffett's Bear Market Maneuvers.)
"If The Business Does Well, The Stock Eventually Follows."
"The Intelligent Investor" by Benjamin Graham convinced Buffett that investing in a stock equates to owning a piece of the business. So when he searches for a stock to invest in, Buffett seeks out businesses that exhibit favorable long-term prospects. Does the company have a consistent operating history? Does it have a dominant business franchise? Is the business generating high and sustainable profit margins? If the company's share price is trading below expectations for its future growth, then it's a stock Buffett may want to own.
Buffett never buys anything unless he can write down his reasons why he'll pay a specific price per share for a particular company. Do you do the same? (They don't call him "The Oracle" for nothing. Learn how Buffett comes up with his winning picks; check out Think Like Warren Buffet.)
"It's Far Better To Buy A Wonderful Company At A Fair Price Than A Fair Company At A Wonderful Price."
Buffett is a value investor who likes to buy quality stocks at rock-bottom prices. His real goal is to build more and more operating power for Berkshire Hathaway by owning stocks that will generate solid profits and capital appreciation for years to come. When the markets reeled during the recent financial crisis, Buffett was stockpiling great long-term investments by investing billions in names like General Electric and Goldman Sachs.
To pick stocks well, investors must set down criteria for uncovering good businesses and stick to their discipline. You might, for example, seek companies that offer a durable product or service and also have solid operating earnings and the germ for future profits. You might establish a minimum market capitalization you're willing to accept, and a maximum P/E ratio or debt level. Finding the right company at the right price - with a margin for safety against unknown market risk - is the ultimate goal. (Learn about the different kinds of risk that investors must face in Risk And Diversification: Different Types Of Risk.)
Remember, the price you pay for a stock isn't the same as the value you get. Successful investors know the difference.
"Our Favorite Holding Period Is Forever."
How long should you hold a stock? Buffett says if you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes. Even during the period he called the "Financial Pearl Harbor," Buffett loyally held on to the bulk of his portfolio.
Unless a company has suffered a sea change in prospects, such as impossible labor problems or product obsolescence, a long holding period will keep an investor from acting too human. That is, being too fearful or too greedy can cause investors to sell stocks at the bottom or buy at the peak and destroy portfolio appreciation for the long run.
#STOCKMARKET
#VALUEINVESTMENT
#WARRENBUFFETT
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