Stock Picks

According to an article on MSN Money (http://money.msn.com/investment-advice/buffetts-7-best-stocks-today-brush.aspx?cp-documentid=6836571), following are the safe, stable stocks.

Wells Fargo
Wal Mart
Coca Cola
P & G
American Express
UPS
Johnson and Johnson
 

Stock Screening

Stock Screeners

The best way to determine which stocks to buy is: using online stock screeners. There are a myriad of stock screeners available on the internet. Almost every financial portal will have at least one stock screener: for example, yahoo, google etc.
Some of the stock screeners are paid, and some of them are free. For a beginner like me, I believe a free screener would be a good start.

A typical screener will let you set following parametes:
- Sector/Market
- Stock-related data like: price, dividend, revenue, profit margin, volatility
- Ratios: PE, PS, PB etc

Many sites provide pre-defined screeners, where these parameters are already specified. For example: a site may have defined screeners for Solid Stocks, Large Cap High growth stocks, High Dividend stocks and so on. This makes your life simpler. All you have to do is to pick the screener that suits your investment style and requirements.

 

Stocks - 2

Classification of Stocks:

1. By size: Large Cap, Mid Cap and Small Cap.
Large Cap companies are relatively stable, but their growth potential is less than small caps.
Small Caps have demonstrated faster growth rates over the long period.

2. Growth / Value / Income:
Growth stocks have a healthy growth rate. Many times, risk is associated with higher growth rates.

Value stock: These kind of stocks are undervalued, meaning, they have a lower PE. However, they still have a very good potential for growth. For example, a good company may have had some problems recently (new CEO, change is public perception etc), and hence, the share price is dropped. However, the stock has a potential to be profitable in the long run.
Such stocks are called Value stocks.

Income stocks: these are the stocks that pay out a regular, steady dividends. These are attractive to the conservative investors.

3. Sector: There are 10 market sectors defined by S&P:

Technology
Energy
Health Care
Industrials
Financials
Telecommunications
Utilities
Consumer Staples
Materials
Consumer Discretionary

Historically, Healthcare, Tech and Finance have been considered as fast growing sectors. Utility sector is considered stable, with moderate growth potential.
 

Stocks - 1

Stock Trading Terminology

P/E Ratio: it is the ratio of Price or market value of a share and Earnings per share.

P/E = Price of a share / Earnings per share

For example, if a stock is trading at 50, and the earnings per share of the stock for last year is 2.5, then the PE ratio would (50/2.5) = 20.

Variations:

Trailing PE = Price of share / EPS of last 4 quarters

Forward PE = Price of share / Estimated EPS for next 4 quarters

Interpretation of PE ratio:

PE Ratio indicates if a stock is undervalued or overvalued.

PE ratio should be used to compare companies in the same sector.

A higher PE indicates a higher growth potential.

Companies that do not have PE ratio are not earning (and not expected to) earn anything.

Historically, following is the interpretation of PE ratio.
NA - means the stock does not earn anything, or negative earning. Hence, PE ratio is cannot be determined.
0-10 - means the company is undervalued, and its earningsis likely to go down.
11-17 - this is considered as a fair, stable range of PE.
18-25 - the company is overvalued. Earnings have gone up substancially, in the recent times.
> 25 - means the investors have very high expections about the growth of this company.

It is advisable to compare the PE ratio of stock to the PE ratio of other stocks in the same industry and sector. Also, it should be compared to the overall market, for example, S&P 500 or some kind of a market index.

Price to Sale Ratio: It is the ratio of price per share, to the revenue (or sales) per share.

PS ratio < 1 makes it more attractive.

Price to Book Value Ratio:

Book value means total assets – intangible assets and liabilities.

PB ratio = Price of share / total assets – intangible assets and liabilities

Usually, all these ratios are used to compare companies in the same sector.

PEG Ratio: It is the ratio of PE of a stock to Annual EPS growth.

Ideally, PEG ratio should be < 1.

Investment in India

Here are some links that provide important information about Investments and Taxes in India.

1. NRE/NRO/FCNR Accounts:
http://www.indiantaxupdates.com/2012/11/12/nre-nro-other-bank-accounts-for-nri/

http://www.differencebetween.info/difference-between-nre-nri-and-nro-accounts

Financial Blog - First Posting

 I must admit, I am not at all savvy in financial matters. I am kind-of easy-going, happy-go-lucky, as far as financial matters are concerned. I also must admit, I could have done financially better, had I been keen and aware of finance-related matters, and I could (should) have taken better financial decisions, based on the knowledge of the finance domain.
Anyway. It's better late than never. So, the only resolution I have for this year, is that I will spend as much of my time as possible, educating myself financially.... rather than whiling time away on facebook and likes.

This blog is a tool I am using to:
- take notes on various topics
- periodically revise what I have learned so far

Hopefully this blog will also provide as a ready-reckoner, when needed.
Let's see.

I plan to touch upon following topics:
- Savings
- Investments
- Mortgage
- Taxes

To begin with, I have a bunch of recent Money Magazine issues, not all of them were read thoroughly. I am planning to read them and take notes on this blog.
Not bad for the starters!

FootNote: Contents of this blog are for my own documentation only, and not meant for any commercial purpose. I do not stand to make any profit or gain from this blog.