EQUIP YOURSELF TO MAKE INVESTMENTS DECISIONS YOURSELF

To equip yourself for an effective investment plan you should research about :

Financial Strength 

Financial Leverage
Debt to Equity (D/E)
Interest Coverage
Current Ratio

Quick ratio

Valuation Ratios

Price to Earnings (P/E)
Price to Sale (P/S)
Price to Book (P/B)
Earning Yield
Dividend Yield
Cash Return

Management Side Effectiveness 

Return on Assets (ROA)
Return on Equity (ROE)
Return to Investment Capital (ROC)

Effectiveness

Free Cash Flow (FCF)
Discounted Cash Flow (DCF)
Intrinsic value

Practice Explanation based on Figure 1-2 below

Lets see Opto Circuits India Ltd - Stock Research & Analysis (15 Dec 2008)
The Annual report shows the company grown has grown so fast.Lets Analysis step by step

Reasons

Strong foundation
Stents-the growth engine
Strategic acquisitions
Strong Distribution Network

How sustainable is this growth likely to be in future?

Quality of this growth

Competitive advantage in Core non-invasive business
Sensors: Opto has now emerged as the largest supplier of SpO2 sensors
Patient monitors: New launches to fuel growth
Acquisition of Criticare Systems to widen product portfolio
Invasive Business – future growth engine
Opto’s stents are of superior quality
DIOR: a revolutionary product –launched Feb 2007
Huge Domestic market potential
Growing Innovation focus - R&D, licenses, trials and Patents protection
Niche Segments -Competitive barriers work to Opto’s favour

Profitability

There are these 3 levers that can boost Return on Equity (ROE) - net margins, asset turnover, and financial leverage. (Because ROE = Net Margin x Asset Turnover x Financial Leverage).




Sources of Profitability

Sales
Cost of goods sold

Gross margin
Selling and operating expenses
Operating margin

Fiscal year 07 shows negative free cash flow. The cash flow was negative because the Operating level and is a cause of concern.

Analysis 

Investors should watch this negative cash flow closely. It could be the is catching early signs of improvement and/or worsening of its business operations.

But Opto Circuits has solid ROEs and ROICs margins so we can analysis that Opto Circuits is still in sound financial health

So, what does these negative cash flows indicates?
It's might be an indication that Opto Circuits is re-investing the cash wisely.

After the financial health check, we should check for a solid foundation.

Financial leverage

Debt to Equity(D/E)
Interest Coverage
Current Ratio
Quick ratio

The next step is to analysis the Risks factors as follows

Risks/Bear Case

Litigation Risk
Technological obsolescence
Debtor days on the higher side
Foreign Exchange Risks    

Management

Compensation
Character
Running the Business
Performance
Self-Confidence

                                                                                    The End.                                                             

2013 INVESTMENT STRATEGIES

An achievable and specific financial goal

Good investment strategy starts from your good saving habit.So, you should make a plan to achieve specific financial goal within a time frame. For example I am going to save extra $200 on my saving account this month.

Warren Buffet says " Do not save what is left after spending, but spend what is left after saving"

Lower your credit card loans and personal debts.

To lower the debt you must make a strategy to clear the debt in specific period of time. You can do it by dividing the debt by months and see how much you can put regular amount of money to pay that debt in full. This will generate some saving in future as well reduce your financial stress in long run.

Find your super and consolidate them. 

This is also a long term strategy and helps you to save some money for your future.

Invest in yourself.

This investment should go for your career development and could be anything from education, job training, business setup ,online marketing or stock investment.

But in fact make stock investment your second priority at the beginning.

Though people make lot of money from stocks and once you learn how to trade you can make good money regularly but this is not something you can depend on fully in your life.

So as a beginner, always use your extra time from your work and study to do the research about stock. You can visit my blog regularly to get more and more ideas and also i appreciate if you actively take the participation in discussion.

If you are investing in stock to earn money quickly ,or to get rid of your debt quickly then forget about stocks.


Stock investment is not for lazy people who want to become rich in one day.

Stock investment brings financial security , flexibility and tax advantages.But if you don't have a financial knowledge and not ready to research in depth before investing then it ruins your life with some more debts and losses.

Good research, good reasons, patience and more research for new stocks are key successful factors in stock investment.These terms have too many technical terminologies,formulas and calculation tools.But the basic you get out of all the books,theories and experts are all the same.

They only talk about research, patience and your habits.

2013 BEST STOCK INVESTMENT STRATEGIES

In 2013, to understand the stock market direction and movement, the most powerful indicator is the research on market conditions.

The first strategy is to have more and more cash on your saving account rather than credit cards or loans. The reason for this strategy is that in 2013 the broad based market decline might occur and experts are predicting that in 2013 lots of low value opportunities will be available for trade off. Which will definitely be a good cash investment in 2013?

The next strategy is to sort out long term and short term investments.Categorize your stock investments in short term and long term approach. Having both short term and long term strategy is really a balanced approach in investing. So, trade really good opportunities in short term if you find any but hold majority of your cash for long term investment where you can wait for good opportunities in future or hold stock for long time to get a largest return via different policies and procedures.

In general, It is seen that investments close to the fair value or overvalued are more likely to decline. Trading the overvalued stock gives you some capital for future whereas trading investments close to fair value might reduce your loss a little bit. But the question is holding for long term? Some people when want to hold a stock for long time, some trade-offs questions should be considered.

a) Here we must analyse in terms of investment plan. If trading off the stocks (close to the fair value or overvalued ) gives you some more capital and the rest of the investment is will handle your overall functionality and required amount of income as planned then it is safe to sell. But if this is not the case then it is encouraged to hold the stock for the right period of time.

b) Second trade-off question is about the capital. You have to calculate how much capital you can collect by reducing your position or trading off your stock. If the profit is far more greater than the dividend payments received then it is a good deal otherwise reducing your position is not a wise decision.

c) The third trade-off question is the amount of reduction. The trade-off should not be so large that the remaining position of overall investment becomes incapable of generating your required income. In general the amount of reduction should not be that large that it weakens the functionality of your investment plan.

Prioritize the task that requires attention:

Since high priority items cannot be neglected for too long, we should prioritize each item in terms of importance and need. According to your investment plan, you should create a priority list of all functional areas that require attention. This is the best way to prepare for every opportunity. You should be capable of addressing each item considering the expected market outlook and likelihood of opportunities.

The item with more opportunities needs to be listed first.

Functional Investing

Create a prioritized list and perform the necessary research to filter out stocks that meet your investment criteria. Create a wish list according to your investment plan and categorize stocks according to their characteristics. For example short term investment, long term investment, high dividend, ETFs etc and then you finalize the amount of capital and length of time for each category. 

Concentrate on quality and risk

Warren Buffet says on Investment “Do not put all eggs in one basket” and on Expectation “Honesty is very expensive gift. Do not expect it from cheap people.” Minimize unnecessary risk.

For Equities -Focus on growth, competitive history and strong balance sheets.

For Bonds-Focus on high capital and long term established business that is more likely to pay distribution when bond market decline occurs.