SIMPLE TIPS- HOW TO VALUE STOCK

Value pendulum

My grand father is a farmer, he told me important thing which is equally applicable in valuing stock.


He told me that once they grown tomato in there farm and every one was farming for wheat, that year tomato was sold at very high price and wheat was at much lower price, Next year every farmer was ready with tomato seeds, and obvious thing happened ,that tomato was sold at lower rate.

This chain goes with farmers and only Intelligent investor earns the profit.
Yes Intelligent, the one who know to value the stock. As in farming, when everyone grown tomato,  supply was more therefore buyers took it at lower rate.
Same thing investors also do, they buy stock which are overvalued, and then price of bid drops, and bear loss.

So question is how to value it, when to decide, Stock is at fairly valued or under value.

In my previous blog I told about concept of pendulum,

where to invest

This pendulum swings and only intelligent  investor Know when to act.


1) You should find company that is under valued due to temporary problems,such as any news of unstability and rumors, or bad news about companies product or service. These are not permanent but due to these rumors, big stocks are under valued by noobie Investors.

2)  You should see financial condition of company, i.e does it has loan or more liabilities than assets. This is major point of valuing stock company, you should read balance sheet of company.

3) History on returns and dividend given by company. It also plays important role in determining companies growth, as It reflects management of company which is again major point.

4) Niche(category) of company- The niche/category in which your favorite company is working is also important as It decides future of that firm. Example in today's world demand of cigarette is increasing so it's possible to buy stock of cigarette company for future, Example ITC.  Also export duty are increasing so that niche can be avoided.

There are many tactics to find value stocks as that can be learnt by coming to market and Reading are free blogs, stay connected with us @ financefarmer1@gmail.com and become rich or believe in fairy tails