How do you select a stock for investments? Are there some well-defined traditional ways to pick a stock? What do the people usually look when they decide to pick up a stock? If these questions are spinning your head, then Zee Business has a solution. Market Expert Pranjal Kamra offers these 5 important tips to investors. Take a look!

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Here are the top 5 tips for investors:

1
Kamra said that while picking up a stock the most important rule is to check the financials or the balance sheet of the company. There should be no debt and the promoter holding should not be pledged. The company should be earning profits and also there should be a revenue growth.

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2
It is important to see the profit and loss statement of the company over a period of five years. The overall assets and liabilities should be looked at, he said.

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3
The investors should also look at the valuation of the stocks which can be seen at what Price-to-Earning (PE) multiple is the stock available.  

4
While the profit and loss statement and the balance sheet are a backward-looking aspect, the stock is valued at the future it holds. Markets always look at the future of the stock. As an example, he mentioned about Castrol shares which used to do wonders, earlier. Now everybody knows that the future is Electric Vehicles (EVs). While the balance sheet of the company looks strong, the market is uncertain about its future. This stock has not given good returns over the last few years, he said.

5
He also advised investors to look at competitive advantage in a company. One will have to look at the business model of the company. If the company is able to earn higher profits despite any amount of competition, then it works for the company and the stock.