How to identify Good Stocks in a falling market | Akshat Shrivastava
Summary
TLDRIn 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
📉 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.
🏭 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.
📈 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.
🚀 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.
Mindmap
Keywords
💡Market Panic
💡Stocks Discounted
💡Industry Analysis
💡Macroeconomics
💡Capacity Expansion
💡Domestic Play
💡Debt to Equity Ratio
💡Value Added Products
💡Red Flag Analysis
💡Growth Triggers
💡Stock Fundamentals
💡Shareholder Patterns
💡Capital Intensive Businesses
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
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