In this blog you will learn about Basics Of Stock Market in a simple language.
Warren Buffet says that he had learned a lot from Benjamin Graham [author of "The Intelligent Investor"], but there is another person from whom he learned a lot and that person is Philip Fisher [author of “Common Stocks And Uncommon Profits”].
At the beginning of his journey, he invested with Benjamin Graham's philosophy but he got maximum growth when he invested with Philip Fisher's philosophy. Warren Buffet said that he was very impressed with Philip Fisher's Philosophy.
Today we will learn about stock market basics by using Benjamin Graham and Philip Fisher's philosophy.
- Benjamin Graham's philosophy says that if you want to find out the value of a company, then imagine that the company will be closed tomorrow i.e that the company will not earn a single rupee from tomorrow. Now calculate all things owned by the company and subtract the debt of the company from that amount, that is the real value of the company.
[ Value Of Company = Things Owned By Company - Debt Of The Company ]
Many people say that Benjamin Graham's rules cannot work in India because investors don't trust management, they know that the money will never reach the shareholders.
- Philip Fisher's philosophy says don't buy C-grade companies at a low price because 99% chances are that these companies will never grow. Instead, buy shares of good companies at a fair price and never sell those shares because these companies will always grow and their share price will also grow. In short, your money will keep growing.
Now the question arises of how we will identify those companies. To identify those companies Philip Fisher has given 5 points checklist.
Short Term Or Long Term Range Outlook To Profit
This point means that the company is focusing on short-term profit or on long-term profit. If a company focuses on the short term profit then chances are that the company will not survive for long but if the company focuses on long-term profit then the company will definitely make profits in the long term and if you invest money then it will definitely grow.
Company Has Above Average Sales Organization
This point means that a company should have a good sales and marketing team. To understand this point let's take an example
In 2021 Unacademy had generated a revenue of Rs 464 crore and On the other hand, Bygus had generated a revenue of 2800 crore in 2020. This is due to the aggressive sales team of Bygus. Their sales team goes to a student's house and asks difficult questions and when the student doesn't answer those questions then the sales team tell their parents that your child doesn't know anything and if this continues then your child’s future will be in danger and he will not able to achieve anything in life but if he/she joins Byjus then he will become a topper of the class.
By saying these lines they generate good sales.
See Management In A Bad Situation
When the company is performing well, then its management will come and say that they have achieved all this but in a bad situation, they will run away. But good management will accept its mistake even in bad times. If management is good and hardworking then the company will surely perform better.
Scuttlebut Investing
This point means if you are investing in some company then go to the market and experience its products, ask its costumes about its products, check online reviews and do all the possible research. If the results are positive then it's a good company to invest.
Product Should Be In A Sizeable Market
This point says that the product or service a company is providing should always have an increasing market size. If the market size will not grow then the company will stop growing after a certain level. A good example of this is electric vehicles whose market size is increasing rapidly.
0 Comments