Finance Explained

Hello people welcome to another blog. These is the second part of the fundamental analysis of stock my first blog on basic fundamental analysis is the first part of these series do check it out first. In my last blog you learn some basic of fundamental analysis but it was just an tip of an iceberg. There more deep in we have to go for analysing a company. Finding best company to invest is just 10% but the 90% is to hold it for long term in ups and downs for great wealth.

The products that are in FMCG sector which are our daily essential products, that companies are more successful in stock market. Always buy those companies stock that are in our daily used in todays living. For example we have HUL (Hindustan Unilever Ltd.) which is a leader in FMCG. It’s been in market for more that 89-90 years long. At home you will find some of HUL products for sure. While investing in stock it is always important for us to go all aspects of view like Financial, management and business tenets. The management of company represent the goodwill of company. All the great Investors believe that financial as well as management tenets are important.

The good management represent good market price were bad management represent bad market price.

Benjamin Graham, The Intelligent Investor 1949.

These will be the continuation of my last blog were we completed the initial financial tenets but what future we have to do is the management and business term consideration. The management of any company should be honest and more productive in nature. Focus on what are the management future plans with business. Have they ever completed their targets which they had it in past years or quater. And if they didn’t achieve it what was reaction, did they changed their plan or accepted thier mistake. We should avoid purchasing company that fundamentally changed thier plan because of their past plan was unsuccessful. We should also know that does the company current product will be usefull in future or not?. Will the future sales potential will be the same as it is of today?. Will the company will survive the future market crashes and recession or inflation and how so?. Find company that are in market for more than 20 years. Listen to the company’s conference meeting or annual report of the company. This will give you the answer of above all questions.

Look at the company’s shareholding pattern. It helps alot to understand the insite of the company like what’s going inside the compan. There are promoter, Fiis (foreign institutional investor) and Diis (Domestic institutional investor) and us as a retail investors are types of holder. If the promoter holding is increasing it means the company is in prosperity phase. If the company promoter is % percentage is decreasing it means it’s not safe to invest in it. As for Fiis and Diis the same condition is applied.

Look at the company’s balance sheet. It represent the company’s current position value and everything of the company. How many assets does the company have? Are they generating income from it and how many liabilities that the company is having?. How much debt the company is?. How much income is maded and complete and how the company use its cash flow in business. Does it reinvest it all money or pay dividend. If the company is matured and well established it does not require re investment now they can pay dividend. How much the company’s cash flow is generated. The free cash flow means the money left idel after reinvestment and dividend payout. The free cash flow can be used to improve products and business and management tenets. By these we will complete the business and management tenets of companys. If you get all of the above answer by the company’s, you can invest in it.

In last, in fundamental analysis it is not important of what market trend is going for long term you can invest money whenever you want or can invest at an average market crash were your stock will be more discounted for you. The financial, management and business understanding is the only important thing while investing. Thank you so much for reading the blog till, I know these blog went to long for you but i hope so you understood everything from it. It means alot for us. For future I will also upload the technical analysis of stock for Intraday and swing trading. Thank you.