As the economic growth of various nations including India is nose diving, many investors might be worried about their investment portfolio. As most businesses are finding it hard to carry on operations as usual, this is severely impacting their performance in the markets. The sectors affected worst are automobile, finance sector companies and PSU banks. A lot of stocks in these sectors have seen a double digit fall.
This has led to a steep fall in the Price to Book (P/B) ratio of a lot of stocks include some mid cap stocks as well. P/B ratios of some of the stocks have fallen below the 2008 levels. A lower P/B ratio means that a stock is good for investing as it is undervalued. While this may be a good opportunity to invest in stocks like these, but investing solely on the basis of a P/B ratio might not yield good results for investors.
So what should you do and which are the best stocks to invest now?
This can be decided on the basis of many factors and with proper research. For choosing stocks for long term investments, an investor should study the following things in the stocks:
Shares Of Companies With Good Financial Growth
A good share to buy would be one which has a strong balance sheet and a stable cash flow. It is important to consider which company would be able to recover quickly when this pandemic is over. For mid caps, this might be a longer time horizon.
Shares Of Companies Which Have High Dividend Yield
If as an investor you want to stay away from the riskier path of mid and small caps, then large cap companies with high dividends can be a good bet for you. Companies that pay high dividend yield also provide investors with some income apart from wealth generation opportunities. An additional cherry on top for high dividend yield companies would be a debt- free company.
Those Shares Where ROE and ROCE Percentages Are High
The return on equities is a major indicator of the financial status of a company. Along with high dividend yield and debt free status, if a company is having a high ROE percentage, then it can be a really good choice for a long-term investor.
Stocks Which Are More Volatile
Investors should also look at the beta value associated with a stock. While higher Beta value would mean a riskier investment, the possibility of reward in such stocks is also high. On the other hand, investing in lower beta stocks would quite limit the possibility of earnings from the equity.
Stocks Showing Strong Technical And Reversal Patterns
While understanding technical analysis is not a easy task, but a company whose price charts look good on the technical side might be a profitable buy for investors. You can also take help of certified investment advisor to help you understand the technical analysis of the price charts.
Ultimately, one has to remember that investments are subject to market risks and financial securities such as shares are leveraged assets. It is possible for investors to lose out all their money in the markets. The markets work on the risk reward ratio which means that higher the risk, higher is the possibility of reward.
Despite this, corrections in the market such as are being witnessed right now, present the possibility of investing in stocks at lower valuations as markets always recover from such downfalls. The speed and time duration of recovery, however, is variable.
Data is updated on 7th per month. It gets verified every quarter by independent auditor.
Data presented here is taken from company's inception
Importance given to satisfactory resolution as per prescribed TAT