Tuesday, November 18

How to tackle the bear run

Nothing is going good for the economy (whether India or the world). The markets are down and no one knows where it is heading. But there is one common view. The markets have bottomed out and there is little downside from here. However, no one knows when is it going to revive. The levels of 21000 seems fantasy at this point.

Analysts are jobless and are considered a liability to the erstwhile employers who used to flaunt a research division not more than 4 months ago.

But it is said that if there is anything that comes for free in India, it is advise. So here I am, giving free advise. I know I wont be paid foir it anyways ;-)

Seven ways to tackle the bear run
  • Stick to stocks of large companies
  • Look for debt free companies
  • Search for businesses that are insulated (well, relatively) from the slowdown
  • Look for companies that largely depend on domestic revenues
  • Search for value stocks (generally cash-rich companies)
  • Have an investment horizon for at least 2-3 years
  • In case of mid-cap stocks, choose companies that are market leaders, are niche players and possibly belong to sunrise sectors
-adapted from the Businessworld, 17-nov-08 issue
You may also apply a set of financial filters:
  • PE Ratios below 16
  • Debt-Equity Ratio below 1
  • Net profit growth and operating margins of over 10% in the last three financial years as well as in the 1st half of FY 09
  • Average 3 year return on equities above 20%
So you may follow the advise and invest based on this. But standard disclaimers apply. You wont give me a share if you profit, dont blame me if you lose either.

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