How to identify Good Stocks in a falling market | Akshat Shrivastava

Summary

In this video, the host addresses market panic and the opportunity it presents for buying discounted stocks. They use CAMS as an example to illustrate the importance of industry analysis and understanding the company's fundamentals. The speaker emphasizes the significance of assessing the industry's future prospects, the company's capacity expansion, and financial health, including debt-to-equity ratios. They also highlight the importance of red flag analysis, using conference call data to gauge management's insights and strategies. The video aims to educate viewers on the process of stock analysis, without making specific buy or sell recommendations.

Takeaways

• 📉 Market Panic: The video discusses the current market panic and how it has led to some stocks being discounted, which might be an opportunity to buy.
• 📈 Stock Analysis: The speaker emphasizes the importance of analyzing a stock thoroughly before investing, using CAMS as an example of a stock that has fallen but may still be a good investment.
• 🏭 Industry Analysis: Understanding the industry trends and prognosis is crucial for evaluating a stock's potential, especially in sectors like mutual funds and steel industry.
• 🌐 Global Factors: The speaker mentions how global factors, such as China's demand for steel, can impact the industry and, by extension, the stocks within it.
• 📊 Cyclical Nature: The script highlights the cyclical nature of industries, suggesting that understanding these cycles can help identify investment opportunities.
• 🏢 Company Fundamentals: The importance of looking at a company's fundamentals, such as market cap, PE ratio, and business expansion, is stressed for making informed investment decisions.
• 📊 Growth Potential: The video suggests that investors should look for companies with capacity expansion and a strong domestic market presence to minimize external risks.
• 👤 Shareholder Patterns: Monitoring changes in promoter and FII holdings can be a healthy sign of confidence in a stock's future performance.
• 🚫 Red Flag Analysis: Investors should be aware of red flags such as high debt-to-equity ratios and should understand the context before making investment decisions.
• 📈 Triggers for Growth: The speaker identifies potential triggers for growth in an industry, such as changes in commodity prices or domestic economic growth, as important factors to consider.
• 🏛️ Real Estate Connection: The script points out the connection between the real estate industry and the demand for steel, suggesting that a rebound in real estate could positively impact steel stocks.

Q & A

What is the main topic of the video?

The main topic of the video is discussing whether it's a good time to buy stocks that have been discounted due to market panic, and how to analyze such stocks.

What is the example given to illustrate a stock that has fallen in value?

The example given is CAMS, which has fallen by approximately 22% from its stop, and the video discusses how to analyze such a situation.

What is the first step suggested for analyzing a stock?

The first step suggested is to understand the industry of the stock, as it is crucial for determining the stock's potential for growth or decline.

Why is reading the annual report and conference call data important according to the video?

Reading the annual report and conference call data is important because it provides insights into the company's performance, strategies, and future plans, which are essential for making informed investment decisions.

What is the significance of industry analysis in stock evaluation?

Industry analysis is significant because it helps to understand the overall health and growth prospects of the sector the company operates in, which directly impacts the company's performance.

How does the video suggest evaluating the demand for an industry?

The video suggests evaluating the demand by considering factors such as macroeconomic trends, consumer behavior, and industry-specific reports that forecast growth or decline.

What is the role of capacity expansion in a company's growth?

Capacity expansion is crucial as it indicates the company's ability and intention to increase production, which can lead to higher revenues and growth, assuming demand remains stable or increases.

Why is it important to consider a company's exposure to external factors when analyzing stocks?

Considering a company's exposure to external factors is important because it can affect the company's revenue and profitability. For instance, a company heavily reliant on exports may be vulnerable to global economic fluctuations or trade policies.

What does the video suggest about the relationship between a company's market cap and its valuation?

The video suggests that a company's market cap can influence its valuation. Smaller cap companies may have higher PE ratios due to market expectations of rapid growth, whereas larger cap companies may have lower PE ratios due to their maturity and slower growth rates.

What are 'red flags' in stock analysis, and why are they important?

Red flags in stock analysis refer to warning signs or potential risks associated with a company, such as high debt-to-equity ratios or declining revenues. They are important because they can indicate potential problems that could negatively impact the company's performance and an investor's returns.

How does the video suggest identifying triggers for growth in a company?

The video suggests identifying triggers for growth by monitoring factors such as changes in commodity prices, domestic economic growth, and industry-specific trends that could positively impact the company's business.

Outlines

00:00

📉 Stock Market Panic and Investment Opportunities

The speaker begins by addressing the current market panic and the subsequent discount on various stocks, questioning whether it's a good time to buy. They use CAMS as an example, which has fallen by 22%, and discuss the importance of industry analysis when considering such stocks. The speaker emphasizes understanding the mutual fund industry's prognosis and suggests that if the industry is expected to grow, stocks like CAMS could offer a good opportunity. They also mention the importance of reading reports, conference calls, and recognizing that each stock behaves differently. The speaker shares their personal experience with CAMS and advises viewers to analyze the industry and specific stocks before making investment decisions.

05:00

🏭 Analyzing the Steel Industry for Investment

The speaker shifts focus to the steel industry, discussing how its revenues are tied to steel prices and macroeconomic factors. They suggest that if steel prices are low and demand is expected to rise, investing in the steel industry could be opportunistic. The speaker introduces Hightech Pipes as an example of a company that has expanded its capacity and is primarily domestic, which could be beneficial if global steel prices increase. They clarify that this is not a stock recommendation but a teaching moment to recognize potential stocks. The speaker also touches on the importance of market cap, PE ratio, and P/B ratio in the context of a company's size and growth expectations.

10:01

📈 Assessing Company Fundamentals and Red Flags

Continuing the analysis, the speaker advises on the importance of company-specific fundamental analysis, including market cap, business expansion, and profit growth. They mention Hightech Pipes' small market cap and high PE ratio, suggesting that such metrics should be viewed in the context of the company's potential for growth. The speaker also discusses the significance of promoter shareholding and the need to understand red flags such as high debt-to-equity ratios, especially in capital-intensive industries. They highlight the importance of analyzing the company's capacity expansion, fixed assets, and the nature of the business, as well as the company's ability to manage debt and grow.

15:02

🚀 Identifying Growth Triggers and Investment Decisions

The speaker concludes by emphasizing the need to identify triggers for growth in the industry, such as changes in steel prices or domestic growth factors like the real estate sector. They provide an example of how the bounce-back of the real estate industry positively impacted steel demand. The speaker also discusses the importance of pro-con analysis and making informed investment decisions based on one's portfolio and risk profile. They mention offering courses for those interested in intensive learning about stock investing and portfolio construction, highlighting the high completion rate of their courses as a testament to their effectiveness.

👋 Closing Remarks and Engagement Invitation

In the final paragraph, the speaker invites viewers to like, subscribe, and engage with the channel for more content. They express hope that the discussion provided valuable insights into stock analysis and investment strategies, and they look forward to connecting with the audience in future videos.

Keywords

💡Market Panic

Market Panic refers to a sudden and widespread fear among investors that leads to a rapid sell-off of stocks. In the video, it is mentioned as a situation where many stocks have become discounted, prompting the question of whether it's a good time to buy such stocks. The script uses this term to set the context for discussing the analysis of stocks during times of market distress.

💡Stocks Discounted

When stocks are 'discounted,' it means they are being traded at a price lower than their perceived value. In the script, the example of CAMS falling by approximately 22% is given to illustrate a stock that has become discounted, which is a common scenario during market panic and is central to the discussion on investment opportunities.

💡Industry Analysis

Industry Analysis is the process of evaluating the performance, attractiveness, and future prospects of a specific industry. The video emphasizes the importance of understanding the industry trends and prognosis, such as the mutual fund industry in the case of CAMS, to make informed investment decisions.

💡Macroeconomics

Macroeconomics is the study of the economy as a whole, including factors like growth, inflation, and unemployment. The script mentions macroeconomic indicators as a tool to predict future demand for industries like steel, which is crucial for investment decisions.

💡Capacity Expansion

Capacity Expansion refers to the increase in a company's ability to produce goods or services. In the context of the video, the company Hightech Pipes is highlighted for its capacity expansion efforts, which is a positive sign for investors as it may indicate future growth.

💡Domestic Play

A 'domestic play' in investment terms refers to a strategy focused on the domestic market, reducing exposure to international risks. The script explains that Hightech Pipes, with 97% of its revenue from India, is less likely to be affected by external factors, making it a potentially safer investment.

💡Debt to Equity Ratio

The Debt to Equity Ratio is a financial metric that measures the proportion of a company's financing that comes from debt versus equity. In the script, a high debt to equity ratio of 63% for a small cap company is discussed, indicating the risk associated with such investments.

💡Value Added Products

Value Added Products are goods or services that offer additional features or benefits beyond the basic product. The video script mentions that competitors are adding value-added products, which could be a strategy for the company discussed to improve its margins.

💡Red Flag Analysis

Red Flag Analysis involves identifying potential warning signs or risks within a company's financials or business practices. The script uses this term to discuss the importance of scrutinizing a company's balance sheet, debt levels, and other financial indicators to avoid poor investment choices.

💡Growth Triggers

Growth Triggers are events or conditions that can stimulate an increase in a company's or industry's performance. The video identifies potential triggers such as changes in steel prices or a rebound in the real estate sector, which could positively impact the steel industry's growth.

💡Stock Fundamentals

Stock Fundamentals refer to the financial and economic data that make up the basic financial identity of a company. The script advises viewers to perform a fundamental analysis of a stock, considering factors like market cap, profit growth, and valuation, to assess its investment potential.

💡Shareholder Patterns

Shareholder Patterns refer to the trends in the ownership and investment in a company's stock. The script notes that an increase in promoter stake in a company can be a healthy sign, indicating confidence in the company's future prospects.

💡Capital Intensive Businesses

Capital Intensive Businesses are those that require significant investment in assets and infrastructure to operate. The video discusses the nature of capital-intensive companies like those in the steel industry, which often have higher debt due to the need for substantial capital to expand.

Highlights

Market Panic has led to discounts on many stocks, presenting potential buying opportunities.

The example of CAMS stock falling by 22% raises the question of whether it's a good or bad stock to buy.

Investors are advised to read reports, attend conference calls, and understand the data behind each stock.

Industry analysis is crucial, with mutual fund industry trends potentially impacting CAMS' performance.

Understanding the cyclical nature of industries like steel, influenced by macroeconomic factors, is important for investment decisions.

The potential for increased steel demand in India, due to lower per capita consumption compared to global averages, is highlighted.

The company Hightech Pipes is mentioned as an example of a company with capacity expansion and domestic focus.

The importance of a company's market cap and its impact on valuation metrics like PE and PB ratios is discussed.

Shareholder patterns, such as promoter stake increases, can be a positive sign for a company's prospects.

Red flag analysis involves scrutinizing a company's debt to equity ratio and understanding the business's nature.

Conference call data can provide insights into a company's strategies and potential red flags.

Value-added products and their impact on company margins are a point of discussion in the transcript.

Triggers for growth in an industry, such as changes in steel prices or domestic growth factors, are important to identify.

The real estate cycle's potential influence on steel demand and related stock performance is examined.

The need for a systematic approach to stock analysis, including portfolio construction and risk assessment, is emphasized.

The speaker offers courses for intensive learning on stock investing and portfolio management.

The transcript concludes with a reminder to conduct thorough analysis before making investment decisions.

Transcripts

hi everyone welcome to today's video so

there is a little bit of Market Panic

that is going on and many stocks have

gotten discounted is this a good time to

buy such stocks so let me start with an

example right of the bat so for example

here you will see that cams has fallen

from its stop by approximately 22% now

just 15 20 days back cams was a great

stock now because it has fallen by 22%

then people are saying that you

know so is cams a good stock bad stock

how you should go about analyzing it so

I'll give you some pointers by hopefully

if you watch this entire video you will

at least understand the process of

analyzing a stock right I'll pick a few

examples along the way it will give you

more clarity now one quick input that is

given by many seasoned investors is that

you know

what an report read like conference call

data also but right that's the most

important point because every stock

Works differently so okay so very

quickly just say for example if you go

on cams and take a look at this so you

seeb right so this is fine right this is

something that you can check now you are

getting to buy this stock at like 20%

discount or 22% discount right then what

you will do you will go and you will

check price then right it went all the

way till 4367 so

100% right and now it is corrected by

20% discounted how do we analyze right

okay so here are a few quick points that

I will tell you number one thing is that

you must understand about the industry

for example cams industry CS mutual fund

Stock Investing industry so if the

prognosis is that in the next leg that

happens in the mutual fund

industry continue so then a stock like

camps will continue to give a run up so

this type of Industry analysis is very

very important so mutual funds sips then

you know what something like cams can

give or continue to give good run up

right why because the industry is doing

well now idea for example now people are

getting scared and camps by the way it

was there in my portfolio I'm still

holding it I am adding not adding more

positions I'm not going to reveal I only

talk about such things on my member

Community because openly tring if the

stock does not starts running from

tomorrow right so I mean honestly

there's no point in even addressing

trolls right I

me so anyways coming back to the topic

see the idea is that you should actually

buy

Industries

okay for example steel industry now

steel industry revenues depend on what

well it depends on the price of steel

steel

price it will be sold as per weight

times price

right so if these steel prices right now

are absolute low and if you're feeling

you know what okay in the next one year

two years macroeconomics tells us that

steel demand is going to rise then

probably doing that swing on that

industry makes a lot of sense okay so

this is literally Point number one and

then you need to ask a very basic

question about the industry in fact two

things that you need to ask about the

industry number one thing is that hey

Will the demand for this industry go go

up right so steel

steel price right why because China isue

China say steel demand and China was the

biggest consumer of Steel in a way why

because their real estate industry was

doing very well now for the last 2 three

years Chinese real estate has been doing

really bad and one could argue that it

has bottomed out okay so now and maybe

it will take like one year two year to

recover I don't know but whenever

recovery happens the steel price will

recover with it it's cycal

right cyle right so this is one and this

is where the opportunity lies or at

least one of the opportunity lies

in fact I myself do not invest heavily

in capital intensive companies but

whenever there is an opportunity you

have to analyze it and accordingly pick

some opportunistic bets okay so this is

the bottom line that I'm trying to coach

you on related Point here would be that

you look at the demand of Steel in

India so this is where the situation is

that if you look at the per capita

consumption of Steel in India it is only

at 77 okay China made 646 right globally

233 average rest of the world India

there is scope for increasing this

demand and indry reports right so for

example here is an industry report for

you it estimates that in the next 5

years the steel industry or the

consumption of steel pipes and tubes

will grow at roughly 8 to 9% now for a

commodity product this is fairly high

right so these are basic building

blocks go and pick out a company which

is doing well or which is likely to do

well in this segment and Anis right now

I'm going to speak about a company

called as Hightech pipes recommendation

absolutely not am I buying it myself

absolutely not AB I'm just teaching you

how to recognize these type of stocks

that's it okay I might buy it it might

be on my watch list when will I do it

all that stuff again this is not a stock

recommendation I I explain you all the

logic facts other data points on my

member Community my detailed reports in

sub companies so in case you are

interested and again that's not a

recommendation advice I'm simply

pointing you in the right direction so

why did I pick this company it is very

simple and there are two reasons right

so one is that it's capacity expansion

company major factories right and for

the last dat 1 2 3 4 five last five

years data they have expanded their

capacity in all of these segments or all

of these factories they have increased

their capacity this is0 one point two is

that I'm looking at a company which will

not get hampered by exporting right so

just

company overall business so what you

will realize is that almost 97% of its

Revenue comes from India

okay you know you just

said so then how will this company

benefit well because the price of steel

worldwide goes up so Indian steel

consumption Indian steel so that price

is also likely to go up so that is the

play but at least they will not get hit

by external factors China Dy right on

Indian Steel ET Etc

so for

examp onel so you know China say steel

produce it might come so that risk is

always there but it's lower when you are

doing a domestic play so from that note

this company does a domestic play so it

makes sense so I hope that these basic

points are clear industry analysis and

very quick do a stock analysis so what

is it that this company is doing so

number one thing is that see the market

cap of this company is only 2,000 CR so

it is a high risk High reward type of a

setup small cap

midap closely right so and to understand

the valuation okay natural

question right yes this is very high PE

for a Steel stock no doubt about that

but p ratio you have to see in context

of the size of the company for example

you know dmart to dmart P right now is

close to like 110 okay so now what is

the size of dmart it is a Ultra large

cap company so to say okay so and what

about like you know small cap companies

small

comp why

because growth rate that the market is

giving they are expecting the company to

double in size every let's say 2 to 3

years or 3 to 6 years or something like

this so large cap companies type in how

many years do you think it will double

its market cap because it's a large cap

company the bus is good it's expanding

it's reducing it's borrowing all that

stuff if the industry is propelling its

business so and in context of that you

have to search okay so these are all

significant points that you need to

learn

open you have to you know learn these

these systematically and all that so I

do run courses so in case you guys are

interested in learning intensively then

you can always Avail them I will put the

links in description and comment box so

coming back and completing our analysis

so if you take a look right a is

business expanding for the company yes

okay is the profits going up for the

company the answer is yes the only issue

that remains on this company is the

valuation for

example but again if you think about it

that the CC is fairly

long this could also be a ccle okay

so so whenever you get an opportunity

keep these type of stocks on your radar

again this is not a buy sell

recommendation in fact small cap

companies because the data is not that

clear many of times so for us also it's

not so easy to just look at the data and

see and you what this is like great

company or not great company public data

analy so I'm just teaching you how to do

that so okay so first point is that do

the industry analysis number two do the

stock specific fundamental analysis also

look at shareholder patterns okay so for

example here you will see that

promoters stocking f increased their

holding have increased their holding so

this is netet a healthy

sign and F PR right so they are trusting

the stock that is one could argue okay

now the next and final point is that you

must understand the red flags so annual

report definitely look at like you know

how much capacity is it expanding is it

increasing its fixed

capacity balance sheet right so so let

me just pull it up fixed assets

right so this is a good point from that

angle company is expanding capacity

which means it would want to manufacture

more now if it manufactures more of its

product manufacturing

sector sector so yeah this company might

benefit from that perspective now then

comes the next point and final Point

flag analysised

flagis right so for example if you look

at the debt to equity ratio it is 63%

now this is very high right but usually

now now you need to understand the

nature of the stock that okay for a

small cap company having higher debt is

okay right I mean I'm not saying that

it's great but it is okay why because

small starts right I mean they require

ITT right I mean in order to grow

otherwise where will they get the

capital from debt high is not

necessarily a problem simply because

these companies can grow faster and turn

around they can pay off their debt

fairly quickly so this is one related

Point look at the nature of the business

for example Steel

Capital intensive you have to take debt

in order to expand so right I mean for

example if you go and take a look at

adani business 8 800% I'm not saying

100% 800%

900% which is like absolute crazy right

so Capital intensive businesses you will

find it so this is a red flag analysis

that you have to do I'm not saying that

this is good or bad I'm just simply

helping you understand the context

number two point as to how you can do

red flag analysis is that you go on

conference call data now I have ped some

segments from it so I'll just take you

through it red flag for example

question my next question is regarding

margins Marg right so then the company

offered an entire

explanation know competitors they are

adding value added

products okay sensible explanation then

you need to figure out that okay is this

company going to get into value added

products so yes this has also been

covered in their con call report for

example

talking about

valed all

that okay at

least understands value addedu therefore

margins are low our competitors are

doing it we will also emulate them we

are on that

track impossible figure out we can just

go by whatever is being explained okay

so the last point that you need to

understand is and Analysis industry

analysis compy analysis then you need to

look for triggers for growth they

triggers for growth in this industry

could be change in steel price again I

will reflect that chart again for

example take a look at it here right

steel price steel price should go down

or up I don't know okay so most likely

chances are that it could go up so this

will be a positive trigger for the

company so what could be another trigger

it could be trigger for domestic growth

just for

example for example India housing real

estate now that was in my portfolio it

has given more than 100% turn up now

reason is real estate industry bounce

back so I was speaking about it for the

last one one and a half years ago and in

fact I purchased a lot of real estate

all that has gone

up the reason is that real estate was in

growth cycle right now if this real

estate cycle continues usually real

estate cycle is 7 8 years now if you

feel

that again real estate cycle will

continue right then what will happen

again the demand of Steel is going to be

be crazy right so that's just one part

of it just say real estate sector bounce

back is it likely to get picked up from

this point or slow down I don't think

that real estate is slowing down we are

still in near 34 of that 78 year real

estate cycle so I don't think that it is

going to get

crushed then you blame it on to

me I cannot comment at like you know

that segmental

level say you have purchased it at

hyperinflated prices and it's not giving

you R up it's not fault okay so I'm

telling whenever I say that you know

real estate is good it means good real

estate is good similarly good stocks are

good not every type of stock okay so

anyways on these type of capital

intensive businesses you have to do

procon

analysis that all signals are bad it

will be a mix then you have to make a

call as per your portfolio so if you

want to learn how to do portfolio

construction retirement planning what

type of stocks to add what type of

stocks to avoid as per your risk profile

so all this needs to be systematically

learned again I run courses in case you

guys are interested a new batch is

starting where I teach live everything

is taught over four days you will learn

about Stock Investing very very

intensively right and and my stock

market course completion rate is 95%

plus so people who sign up for the

course 95% people complete those courses

right that's the most important part one

of for M's courses recorded courses the

completion rate is less than 5% right

that's what industry standard is so

anyways I hope that you enjoy this

conversation it gave you an idea

perspective on how to analyze a stock if

you did do press a like button subscribe

to the channel and I'll see you soon