How to Choose Winning Stocks: Rewriting Formula

133 Pages·2010·3.05 MB·English

HOW TO CHOOSE WINNING STOCKS

HOW TO CHOOSE WINNING STOCKS
Rewriting Formulas for Investment
G.B.R.K. Prasad
Copyright © G.B.R.K. Prasad, 2010
All rights reserved. No part of this book may be reproduced or utilized in
any form or by any means, electronic or mechanical, including photocopy-
ing, recording or by any information storage or retrieval system, without
permission in writing from the publisher.
First published in 2010 by
Response Books
Business Books from SAGE
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Published by Vivek Mehra for SAGE Publications India Pvt Ltd, typeset
in 10.5/13 pt. Baskerville BE Regular by Innovative Processors, Delhi and
printed at Chaman Enterprises, New Delhi.
Library of Congress Cataloging-in-Publication Data
Prasad, G.B.R.K. (Garapaty Balarama Krishna), 1960–
How to choose winning stocks: rewriting formulas for investment/
G.B.R.K. Prasad.
p. cm.
Includes index.
1. Investments. 2. Investment analysis. I. Tittle.
HG4521.P74 332.63'22—dc22 2010 2010003005
ISBN: 978-81-321-0440-7 (Pb)
The Sage Team: Reema Singhal, Anupam Choudhury, Anju Saxena
and Trinankur Banerjee
Dedicated to the holy lotus feet of
Samarth Sadguru
Shri Shirdi Sai Baba Garu

Contents
List of Tables ix
List of Figures xi
Foreword by C.S. Gopinath xiii
Preface xv
Acknowledgments xvii
List of Abbreviations xix
1 Introduction 1
2 Valuation Ratios Related to Market Capitalization 26
3 Analysis of EPS and Assets Per Share Model 49
4 Assessing Indebtedness of a Company 61
5 Identifying Companies Based on Quarterly Results 66
6 Sector-wise Profitability Analysis 70
7 Mutual Funds 83
8 Unconventional Ratios for Identifying Stocks 97
9 General Suggestions Compiled from the Available
Literature 102
Index 109
About the Author 112

List of Tables
1.1 Value of UK Sterling Pound 100 Invested in 1945,
Gross Income Reinvested 8
1.2 Value of UK Sterling Pound 100 Invested in 1990,
Gross Income Reinvested 8
1.3 Profit and Loss Statement of XYZ Company for the
Year Ended March 2009 9
1.4 Balance Sheet of XYZ Company as on
31 March 2009 10
1.5 Cash Flow Statement 12
1.6 Ratio Analysis 13
1.7 Data Analysis for Various Companies as per
Dividend Yield Model 20
1.8 Movement of P/E Ratios of Stocks Identified 24
2.1 Analysis of Scenarios of MCAP/Sales Ratios 27
2.2 Basis for Investment Logic Using MCAP/Sales Ratio 28
2.3 Companies Sorted Out on the Basis of MCAP/Sales 30
2.4 NPM and P/E Ratio for Nifty Basket of Companies 34
2.5 Examples of High NPM and Low P/E Ratio for
Competing Companies 38
2.6 Risk Assessment of Investments Using ROCE
Approach 39
2.7 ROCE vs P/E Ratio 40
2.8 Companies Sorted on the Basis of MCAP to
Assets Ratio 45
3.1 Nifty Basket of Companies with EPS Details 50