Picking Stocks for long term is no brainer if you’re a provided with a Blueprint. Complex people make investing sound so complicated. But obtaining gains from Investing in Stocks is easy-peasy I’d say.
Picking an Industry
You just need to pick a sector which you can understand better. There after learn about industries and sub-industries in that sector. Learn about individual companies, their products and the edge the have over their competitors. All these can be learned by reading a handful of Annual Reports. Now do this for all the sectors. This sounds daunting right? Hence it’s better to eliminate some sectors which we have least competency and filter out some stocks based on their performance on the books.
A simple way to separate the Wheat from the Chaff is to take the help of a Screeners like Tickertape or Trendlyne or Screener.in and shortlist stocks based on past Revenue Growth, Profit Growth and RoCE or RoE. Also you can add Free Cashflows that a business generates to the filter criteria. There are additional filters like MarketCap and Debt to Equity ratio one can opt to play a safe game.
Long Term Investing Strategy
Since, you’re a beginner just invest in Consumer Staples Sector, which is relatively free from manipulation. I follow Saurabh Mukerjea, as suggested by him, you can follow his Coffee Can Investing Strategy where you stay invested in 30 companies for a period of 10 Years. For this to work, Revenue Growth over the past 10 years has to be in two digits consistently. RoCE has to be consistently over and above atleast 15%. Free Cashflows, the more the better. There isn’t a consistency with the data with the free tools to do the analysis. Better go with some paid authentic tool like Bloomberg. And importantly, Management Scrutiny must be the first priority. Check auditor’s report on Annual Reports for any inconsistencies.
Similarly there are multiple strategies developed by different people. Some of them are Value Investing, Growth Investing, Momentum Investing and Algo Investing.
Have you developed any Investing Strategy and would like to share? Put the same in comments.