11 May 2021, 11:46 — 2 min read
Investment in listed equity has become more risky as the stocks rally became an unstoppable event.
Liquidity from FIIs (Foreign Institutional Investors) is holding back decent long due correction.
Given the scenario, in my opinion it is time to shift to emerging companies with low or no FII holding and having low or reasonable valuation. Such emerging nano/micro cap today that has potential to be mid and large cap of tomorrow creating good return on equity for it shareholders.
To identify such companies I am sharing following simple points based on my experience.
1. Promoter Holding - High promoter holding gives confidence of interest of promoter in their company.
2. Reinvestment of Reserves - Reinvestment of reserves for expansion at some intervals gives confidence that promoters want to grow their company.
3. Trend in reducing debt after expansion year
4. High asset turnover signifies optimum allocation of assets
5. High operating margin signifies pricing power in its products
6. Operating cashflows to total capital employed - High OCCE gives indication of efficiency in cashflow utilisation.
Keep these simple points in mind while making any decision in equity space.
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Finance & Accounting 7 Oct 2020