Beginners - Analysis of Stocks

Article : Beginners - Analysis of Stocks

Posted by Suraj Bekal on 4 March 2010
Last update on 3/22/2010 12:00:00 AM. Total replies 7

I am posting this article since i know that when any beginner enters the world of investing in stock markets "HE IS VERY IMPATIENT" and wants quick profits. As such he visits almost all the stock recommending sites and buys stocks with no proper analysis. Sometimes if one is lucky initially then it is an even more dangerous scenario for his further decisions in the same manner with a higher amount as if this time his luck doesnt favour him then he is ruined and comes to a conclusion "STOCK MARKET IS LIKE GAMBLING" and then never turns back or rather his situation doesnt allow him to come back.

I would not say dont visit sites.... please do but at the end of the day it is your money and no one else will be responsible. There are so many sites but as far as my research is concerned if this is the first time you have visited MUMBAIBULL then you dont have to go back to google and search for other sites. Listen and read recommendations but make an analysis and find out whether u will be proud to be associated with the comapny in which u r going to become a share holder. Whether ur company can earn the desired profits in the future. Whether the company is fundamentally sound and has the potential to recover inspite of a huge temporary crisis. Here below are some terms which one should know in order to analyse a company oneself.

There are 2 analysis. FUNDAMENTAL ANALYSIS includes analyzing the company’s management financial health competitive advantage and markets. It evaluates company-specific quantitative parameters such as:

Earnings: The share price of a company generating healthy EPS has a tendency to appreciate.

Debt ratio: The share price of companies with a debt ratio of more than 30% but less than 50% has potential to rise.

Return on Equity ROE : A company that has been recording an increase in ROE for a while is considered a GOOD INVESTMENT option.

Capitalization: The lower the market capitalization i.e. the smaller the company the higher the risk associated with the stock.

Dividend payout ratio: This measures what a company pays its investors as dividends.

Price to Earnings P/E Ratio: This reflects the price that investors are ready to pay for every dollar of earnings the company generates. For the same level of earnings investors may be willing to pay more for a company that has better growth prospects.

Book value: Fundamental analysts compare the company’s balance sheet with the share price to determine whether the stock is overvalued or undervalued.

TEACHNICAL ANALYSIS is a belief that historical share price movements can be used to determine trends which in turn can be used to make predictions of future performance. Variables such as long- and short-term market trend trade volume oscillators moving averages and line and bar charts are used in technical analysis.

The three main rules of technical analysis are:

Market action discounts reflects every positive and negative event

Prices move in trends

History tends to repeat itself
Technical analysis is suitable even for amateur investors and those with a short-term investment horizon but in view of ALL THE PROFIT MAKERS IN THIS MARKET TILL DATE LONG TERM IS ALWAYS SAFER. Now the choice is yours.

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Showing 1 to 7 of total 7 updates for this Investor Education ordered by Latest Updates

Posted by Subbu on 22 March 2010

Suraj, Very good article. This helps in understanding a company before putting money into it esp for beginners. Thanks to all you guys for sharing your knowledge and recommendations.

Subbu

Posted by Sanjay k Tewari on 8 March 2010

hi suraj,

an extremly good artcile to understand the market terminology for beginners like me. hope u will add such article reguraly to enrich our knowledge.

sanjay, dehradun

Posted by Suraj Bekal on 8 March 2010

Thanks a lot guys and my pleasure

Posted by Anand Kumar on 5 March 2010

Extremely good to see members involving in giving / sharing knowledge to each other.

Happy sharing knowledge!!!

Posted by mayur hinhoriya on 5 March 2010

I like the article very much.The information given is basic that one must know for analysis.

Posted by d.s.anupindi on 5 March 2010

Suraj

A very well written article. Straight to the point without beating around the bush or using heavy Jargons. Lucid and clear in steps of what needs to be looked into for a better technical or fundamental analysis. Kudos.

Keep posting such basic elementary ones which would benefit many.

DSA

Posted by Anand Kumar on 4 March 2010

A real nice article Suraj.

Nice work.

Do continue to share your knowledge and expirience with the fellow members.