This Content Is Only For Subscribers
With the advent of the internet, plenty of stock recommendations are available here and there. Twister, Telegram, What Sapp groups and Facebook groups are flooded with stock tips from self-acclaimed experts. Regularly, many analysts are also recommendation dozens of stocks across television channels, the internet and print media. Following those recommendations blindly may cause severe damaged to your portfolio. Instead you should conduct the 2 minute checkup before investing in any stocks. It would not require much time or high intelligence but it can sac your hard earning money. You just need to follow some readily available data and figures.
Before investing in stocks based on any recommendations, follow the conditions.
- Average last three years return on equity is less than 10%
- Debt to equity ratio is more than 1 for the last three years and shows no sign of decreasing.
- Promoters pledge more than 30% of their total shareholding and showing no sign of decreasing. For example, if promoters hold 50% stake in the company, check out whether more than 15% of the stake is pledged or not.
If all three or any two parameters hold true for a particular company then avoid the stock at any cost. If you already hold any such stock then explore selling opportunities.
If just one of those three parameters hold true, then the stock requires in depth attention. If you want to take a conservative approach then avoid because more than 5000 listed stock are available in the market. It makes sense to avoid for doubts.
