It’s quite easy to tell which stocks rallied up after the stock has shown its trend. The most difficult part is to predict what the movement would be at that instant.
Stocks like MRF had quite impressive fundamentals and a graph depicting the movement going in almost 45 degree direction upwards from the year 2008. While investing, technical analysis is not given so much weightage while fundamentals become your moot point. Its quite surprising how people talk about the stocks that have already moved up and do not write about which stocks have the potential to move up.
A vast study of 5–10 years plus experience will tell you that each trader/investor has a different strategy. No one can rely on the otehr person just because the person has said that the stock will move up. Moreover, telling or writing on a public portal or forcing someone to purchase or sell a stock is not legal. However ,people can opine and present their views on such platforms.
I cannot share mu research about which stocks have the potential to move up like MRF however I can guide you why to select or why not to select any stock.
- The first and foremost thing you need to see if the company is providing regular dividends to its old investors. This is one of the most essential factors while picking up a stock.
- The p/e ratio is considered as a major factor in shortlisting a stock.
- Profit and loss statement of the company.
- Financial ratios.
- Industry news.
Some tips to keep in mind:
- Avoid to invest in stocks that are previous multibaggers.
- Value investing is a very popular word nowadays however applying it is rather very difficult. So don't just go by what people say. (Myth: All nifty50 companies if invested today, would give you handsome returs in the future)
- Do not trust the analysts on TV providing tips and sharing the analysis for investing. (REASON: They would never say a stock is bad if they had already invested in it.)
I have jotted down some important points but not in detail. I would not recommend anyone to go by just these things while selecting a stock. A strong fundamental analysis is required to select a company which varies greatly from investor to investor.
A lot of newbies enter the markets with full confidence of minting money within a small period of time but this is not possible. 90% of them exit from markets by losing a lot of their capital or sometimes even every penny invested. Markets can be ruthless sometimes. Never try to overcome the market. It never makes mistake. It is formed of the tides ( like in a ocean) which move in a wavy or zigzag way and that's the nature of the market. It's not that if today, the markets are making new highs means that it will fall down tomorrow or rather it will move up forever. Don't forget what a stock market is. Don't forget its definition.
Mind you all these things mentioned here are for investing and not trading. Trading requires more of technical knowhow and experience more than looking for the fundamentals of a particular company. Technical analysis relates to analysing charts, finding trends and predicting the price action of a stock. Its more a task of emotions that play a crucial role in the movement of prices of a stock.
Stock market investments are subject to market risks. Be careful before investing.
This answer is just to warn people that it's never easy to earn from the markets however it's not impossible. A good fundamental analysis will definitely help.
BY ABHIRAM DAPKE
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