Published on January 3, 2014
Introduction to Portfolio Management Services Introduction to investments in stock markets
Investments in stock market has the potential for earning higher returns versus investment in any other asset class. FACT NOT MYTH
However it is seen that many people have lost considerably in stock markets. And so it is misconstrued by many to be utmost risky and akin to gambling. FACT NOT MYTH
The reason for their losses is mostly because they do not know to invest wisely. FACT NOT MYTH
We now share with you the approach for wisely investing and making money.
You have got it right. You can profit out of stock markets. FACT NOT MYTH
How do you make wise investments ? Answer A systematic step by step approach
Steps for successful investing…. Step 1 Step 2 Step 3 Step 4 • Filter companies prima facie suitable for investments. • Identifying companies with maximum potential for increase in share prices. Simply put, to shortlist where to invest. • Decide how much & when to invest in which company or sector. • Continuously follow the market & developments and take corrective actions as well as decisions on investments & divestments. It requires subscriptions of fundamental databases, application software's, research reports, business papers, access to timely quarterly performances, investor presentations for conducting a research on investments.
STOCK SCREENING Step 1 • Filter all listed entities to create your universe. • Universe to be reviewed every quarter. • Parameters to be considered for generating your universe [all or combination of few based on objectives of your portfolio] – – – – – – – – – – Sales and / or profits: Minimum sales value or profit value [below which investment to be avoided] Growth: Minimum average growth in sales and / or profits in last 3 to 5 years Returns: Minimum average returns on capital employed in last 3 to 5 years Margins: Minimum operating margins [if it is too low ,chances of entity going into red is higher] Dividend: Minimum dividend yield and / or yardstick looking at dividend payout as a % of profits Market capitalization: Define corpus allocation between low, medium & high market capitalization Holdings: Promoter holdings, FII / institutional holdings, pledged shares by promoters Foreign exchange: net outflows or inflows [can have impact on profits with currency volatility] Debt / Equity: trend of leverage levels in last 3 to 5 years and impact on future expansions [if any] Liquidity – Average daily turnover on the exchange [to decide minimum investment in liquid stocks]
Identify companies poised for maximum rise in share price considering following aspects
IDENTIFYING COMPANIES TO INVEST Step 2 • Objective to dig out companies with higher prospects for rise in their prices vs. others • Evaluated on daily basis to gauge opportunities and invest in them considering many parameters including but not limited to – Price Earning Multiples chart over last 3 to 5 years. Also consider PE in comparison to book value. Comparison of PE with revenue and / or profit growth in recent few quarters. – Performances in recent few quarters. – Expectations of performance in next few quarters considering cyclical nature of business, capacity expansion, geographical expansion, change in trends or consumer demand, effect of monsoon, Government policies, currency fluctuations & so on.
Deciding how much to invest & in which company
DECIDING QUANTUM & TIMING OF INVESTMENTS • • • • Step 3 A balanced approach avoiding too much of concentration or too much of diversification is essential. Approach could be based on allocation on basis of sectors, market capitalization of entities or simply based on rules that define maximum or minimum investments in any specific company, industry or a business house. The decision on quantum depends on your liquidity parameters, return expectations & risk bearing capacities, and estimated tenure of portfolio engagement. Decisions for purchasing stocks is to be based on many parameters including – Forecasted PE multiples for 1 or 2 year time frames [based on forecasted earnings] – Current market sentiments – Company specific or industry specific news and its estimated impact on business Timing the market is the most vital activity. Most of the funds, performing good and bad hold similar stocks. The entry and exit price makes all the difference.
Step 4 Look out for change and take corrective actions and make decisions to accumulate, sell or buy considering any of the following parameters Changes in demand of product, competition, Government policies, costs or selling price, emergence of new technology, political environment, management, future expansion plans, etc. REVIEW & COURSE OF ACTIONS
BEWARE There are no shortcut proven methods guaranteeing success.
There are two ways to investing – by self or by engaging a Portfolio manager [even existing investments in securities can be pooled in to open a portfolio account] Portfolio Management Service [PMS] provider in India has to be registered with Securities and Exchange Board of India [SEBI]. Minimum investment required to open a PMS account is INR 25 Lakhs. Portfolio Manager usually charge a small fee and / or work on small profit sharing basis.
Contact us for more information on our Portfolio Management services. Munoth Financial Services Limited (MFSL) incorporated in 1990 is a widely held Public Limited Company. MFSL is a Merchant Banker, a member of the National Stock Exchange (NSE), Madras Stock Exchange (MSE), and Depository Participant (DP) with NSDL and also provides Portfolio Management Services (PMS). It is registered with Securities and Exchange Board of India (SEBI) to provide all these services. MFSL is empanelled with many leading banks and insurance companies for stock broking business. The company has been associated with over 100 IPO’s. MFSL is the Investment Managers to Bangalore based Valmark Infra & Realty Trust, a Category II SEBI registered AIF fund into real estate. Investments in capital markets are subject to market risks. Please read PMS related documents carefully. HQ: Munoth Centre, 343 Triplicane High Road, Chennai 600 005. Landline: +914428591185 | Fax: +914428591189 | Email: email@example.com www.munothfinancial.com
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