Have you heard about the KISS theory?
KISS stands for “Keep It Simple, Stupid.”
And honestly, that’s exactly how I approach investing in stocks. No drama, no overthinking, just straightforward logic.
Speaking of overthinking, have you seen this meme?
It perfectly sums up the chaos that happens when you complicate what should be simple!
And believe it or not, ‘The chad long term investor’ is the one who makes a lot of money in stock market.
So here’s how I keep it simple while choosing a stock:
1. Data-Driven Decisions: I always base my investment choices on solid data. One of my go-to resources is Screener.in, which offers a lots of data for the Indian stock market. This platform provides various metrics that guide my decisions.
2. Invest in Transformative Companies: I once heard Jeff Bezos’ philosophy, he said, “Invest in the companies that you think will change the world.”
This mindset helps identify long-term winners.
3. Choose Promising Sectors: It’s crucial to invest in sectors poised for significant growth in the next 5-10 years. This forward-thinking approach ensures your investments align with future trends.
For now I think Renewable energy, EV, Semiconductor, AI, Data centers, Space – are some of the new-age sectors that can be huge in coming years.
Do your own research on this, but don’t overcomplicate.
Key Metrics I Focus On:
- Sales Growth and Net Profit: I examine quarterly results, focusing on sales growth and net profit. I look for companies that have doubled their sales in the last 3 to 4 years, indicating strong growth potential. Net profit is equally important – it shows if a company is not just growing but also profitable.
- Balance Sheet: I always check reserves and borrowings. Increasing reserves signal a company is setting aside funds for the future, while low long-term debt indicates financial stability.
- P/E Ratio: This is my starting point. If a stock’s P/E ratio is over 100, it’s often a red flag, unless it’s a new-age company like Zomato, where higher P/Es are more common. Comparing the stock’s P/E with the industry average can provide more context.
- PEG Ratio: This ratio is crucial. A PEG ratio below 1 often means the stock is undervalued, making it a potentially great buy. But often, I have bought companies having a less than 3 PEG ratio, as the future seemed promising.
- EPS (Earnings Per Share). It’s a quick way to see how much profit a company is making per share and whether it’s worth my attention. It’s like checking the foundation before building anything fancy—essential and often overlooked.
- Compounded Growth: I also pay attention to compounded sales and profit growth, along with the stock’s CAGR. Consistent growth over 5 or 10 years is a good indicator of a company’s performance.
And most importantly, Don’t buy at an all time high.
Stock market opens everyday (well, almost!). You always get a chance to buy your favorite stock at a better price.
Investing is all about making informed choices. By focusing on these metrics and selecting sectors with promising futures, you can identify growth-oriented companies with strong potential.
Be a chad long term investor!
Vinay Mundhe 