Useful Tips For Long Term Stock Picking

May-24-2019Blog by – Mr. Dhruv AjmeraRead Time: 4 Min.Word Count: 866
132Useful Tips For Long Term Stock Picking
Equity or stock market investing is a long term game.Fundamental analysis of stocks is the key for such an endeavour.Such researchinvolves analysing the company financial statements along with macroeconomic data. To find out whether a stock is a good long-term buy, it makes sense to evaluate earnings via financial analysis of a company. Successful investors tend to adapt a buy and hold strategy which entails getting into quality stocks at an opportune time and waiting for a sizable time period to reap the rewards of their decision. However, as the legendary investment Guru Warren Buffet says, Investing is simple, but not easy. Before you think about investing your hard earned money in the sharemarket, you need to understand and embrace this basic principle of investing. The idea of making money in online equity trading is simple, but the learning process could be excruciating. It will test your patience and your ability to maintain discipline in times of uncertain movements in the market. However, excellent rewards are there to be reaped for those who are willing to go through it. Here are a few useful tips to help you make winning long-term stock market trading decisions.

Focus On Sales Growth: One of the primary and easiest ways to assess the financial conditions of a company is to focus on the sales growth. Fundamental analysis, which entails researching financial statements of companies,is a deeply engrossing process. Simplifying the complexities of the investing jargon into actionable bits and pieces helps in clearing the big picture for lay investors. A consistent track record in terms of strong sales growth compared to the rest of the industry makes a company stand out.

Pay Attention To Dividends: A company`s ability to pay dividend on a consistent basis shows that it has predictability in its earningsand is likely to reward investors well. It also shows that the company is financially strong enough to pay that dividend (from current or retained earnings). It is therefore recommended to check the track record of a company on the front of dividends for last 5-10 years. If the companyis financially strong, then such astudy would reveal to the investor about its profit sharing potential.

Check the P/E Ratio: The price/earnings ratio (P/E) is a highly popular ratio used to determine whether a company is over or undervalued. The ratio is calculated by dividing the current price of the stock by the company`s earnings per share. The higher the P/E ratio, the more willing investors are to pay for those earnings. However, a higher P/E ratio is also seen as a sign that the stock could be overpriced. A lower P/E ratio indicates that the stock is an attractive value and that the markets have pushed shares below their actual value. However, it is important to look at this figure in relative term rather than in isolation. A practical way to determine whether a company is cheap relative to its industry or the markets is to compare its P/E ratio with the overall industry or market.

Focus On fluctuation in earnings: Sometimes the economic conditions are strong and corporate earnings rise. When the economy is slowing down, earnings tend to fall. If the company has a consistent history of rising earnings over a period of many years, it could be a good long-term buy.Also, look at what the company`s earnings projections are going forward. If they`re projected to remain strong and if the history suggests that the company has managed to deliver on its projects, this could be a sign that the stockis a good long-term buy from fundamental researchperspective.

Examine Debt Levels: During times of economic uncertainty or rising interest rates, companies with high levels of debt can experience financial problems.In good economic times, debt can increase a company`s profitability by financing growth at a lower cost.The debt to equity ratio measures the amount of assets that have been financed with debt. It`s calculated by dividing the company`s total liabilities by its total assets.

Monitor Economic Trends: Stock markets tend to be heavily influenced by underlying trends in economic picture. Successful online market trading participants have to keep a close track of major announcements like inflation, gross domestic product, industrial production, currency movement, credit growth, interest rates etc to get an idea about the near term sentiments affecting the stock markets. Policy decisions affecting a particular sector also need to be considered. For example, the Interim Budget announced earlier this year focussed on consumption and agriculture and hence major stocks belonging to these areas saw a considerable upside and should benefit even more in long term.


Investing is more of an art rather than science and it takes practice to make sound long term investment decisions. While the above guidelines will help you identify winning opportunity in share markets though it is important for an investor to understand his financial goals in clear terms before devising an optimal strategy.Stock market trading can be extremely rewarding over the period of time especially when you keep an open mind and absorb investing wisdom on a continuous basis.

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