- I should understand the business of the company easily.
- I should understand the financials of the company easily.
- The stocks Revenue or Profit should be stable and growing so that it helps me to value it easily.
- The stock should not have a lot of debt.
- I will only invest in a company after completely reading its financial statements, determining what it’s worth and understanding the business operations of the company.
- I should have a mindset of buying a business. I am buying a miniature version of the whole business.
- I will wait for the right moment and swing at the price I like. i.e. I will buy the company at a bargain.
- I should understand what are the factors that affect the revenue and cost of a company. And strategize my buying and selling according to that.
- I should understand that profit is nothing but an indication of, by how much the Revenue is greater than the cost and loss is an indication of, by how much the Revenue is less than the cost.
- I should understand a company’s competitive edge or moat.
- I should understand the competitive landscape to determine who is going to be toughest and survive during hard times.
- I should buy companies for at least 3 months i.e. until the next quarterly results.
- No.1 thing in valuation is earnings, book value and Market price.
- Earnings come from difference between Revenue & cost. Book value comes from difference between Assets and Liabilities.
- Always keep Debt investing (Govt. Bonds) in the back of your mind while deciding returns and safety.
- Always keep in mind, the future growth or collapse in earnings.
- I should understand that it is the temperamental quality, not the intellectual quality that makes a great investor & trader.
- Numbers matter more than the stories.
- Keep up with the news related to the company, competitors and industry.
- In addition to Balance Sheet & Income Statement, I should also look at
cashflowstatement. (Watch Karthik’s video on Cashflow statement)
- I should also do wherever possible the groundwork research (Kicking the Tires) i.e. using company’s product or services myself.
- I should keep a keen eye on the shareholding pattern. The changes in large shareholder’s holdings.
- I should always remember I am buying a share in other people’s business.
- I should understand what a business is, how it works, how we earn money from it. I should have an entrepreneur, a businessman’s mindset.
These will be my investing and valuation rules before buying any stock. Will add more to it in future.
Thanks for reading!