Thread by @Finology_Quest

How to pick a ‘Winning Stock’?

A Deep Scan Method🔍

A Compilation thread!🧵⤵️

#stockmarket #stockstobuy #finance

D - Discount to Intrinsic Value
Would you like to buy a shoe at MRP or would you buy it at discount?

Of course! At a discounted price, right?

So, why would you buy a share at its MRP?

Before investing in a company, an investor should always check are the shares available at a discounted price or not. For this you must know its fair or intrinsic value.

You can learn DCF valuation through this thread -

https://twitter.com/Finology_Quest/status/1565924876229419008

E - Efficiency Ratio

Most imp thing abt a product that attracts us is its price. Before investing in any company, one must look at product/service it is offering & at what cost. For this, one must have a look at company’s efficiency ratio.

E - Ethical Conduct

Kingfisher Airlines is always remembered for its incompetent & unethical management. On the other hand, their competitors Indigo is still leading the industry becoz of skillful, competitive & ethical practices of management.

You can learn about the management of company through this thread -

https://twitter.com/Finology_Quest/status/1575049795319701509

P - Pricing Power

Even in a highly competitive industry, a successful company would be able to sell its product at higher price as compared to its competitors. For Eg, mobile industry is highly competitive, still Apple Inc managed to sell its product at seemingly high rates.

S - Scalability

It is extremely imp to also look at the industry it’s functioning in. For Eg, the insurance industry has a penetration of abt 3% only, which is why the companies operate in this industry have high chances of volume growth & scalability.

Hence, it is imp to look at how much industry is growing in order to understand if the company operating in it will be able to grow its sales or scalability

C - Competitive Analysis

A company should be able to differentiate its product from its peers in order to survive. While analysing stock, one must look at the competitive advantage of the company.

A - Appropriate margin of safety

A bridge is constructed; it is built based on capacity of vehicles it can handle at single time. If it is said bridge can handle 1000 tonnes weight, it means tht it can actually handle a little more 1300-1500 tonnes. This extra margin of safety.

N- No Biases

One of the most basic concepts of behavioural finance says that a trader or an investor must always take into consideration of their personal behaviour.

Also, following a herd mentality often leads to decisions going wrong in the long run.

So, here are two bonus quest tips for staying with us till here!

Tip 1: Check the company's Operating Leverage:

Meaning, the earnings of the company should be on a growth run, but its costs should be stable or, ideally, should not increase.

Tip 2: Pick a company with a business so simple that even a fool can run it:

While choosing between two such companies, investors must avoid picking that company that is extra dependent on its management and would not be able to function in case something happens to it.

Stock picking is not rocket science; rather, it's an art, an art that depends on the skillset of the artist.

With the right techniques and their effective application, anyone can become an expert stock picker!

Therefore, learning more factors & financial concepts is necessary to perform gud research & this is where Quest’s Value Investing Course comes to rescue - bit.ly/quest-value-in…

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