Understanding Cheap Stocks

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  • Before investing in stocks investor should know the status of the stock, understand its current value & if it’s at it’s lowest then one should decide to buy the stock. This presentation helps us understand and analyze what is the right time to buy stocks.This information has been brought to you by Kotak Securities, We also offer real time <a href="http://www.kotaksecurities.com/stock-market-news/equity/1000/equity-market/NSE/ALL/ALL“>share market news</a> and best in class <a href="http://www.kotaksecurities.com/whatweoffer/trinityaccoun.html">3 in 1 online trading account</a>.
  • Before investing in stocks investor should know the status of the stock, understand its current value & if its at its lowest then he should decide to buy the stocks. This presentation helps us understand and analyze what is the right time to buy stocks.This information has been brought to you by Kotak Securities, We also offer real time share market update and news.
  • Understanding Cheap Stocks

    1. 1. Understanding CheapStocks Demystifying Stocks
    2. 2. Introduction • To quote the Oracle of Omaha, Warren Buffet: It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price! •The golden rule for any investor is to buy when stock valuations are at a low, so that he can sell them when they rise in value and book good profits.
    3. 3. Valuation •Valuation is the current worth of an asset or a company. •Valuation has to be considered in the context of the company’s management, capital structure, past performance, expected future earnings and current market price.
    4. 4. Calculating EPS •When considering valuation, it is important to note a few other relative terms such as the P/E Ratio or EPS. •A price to earnings multiple or the P/E ratio is the share price of the company divided by the expected earnings per share or EPS. •EPS, in turn is further computed by dividing a company’s net profit by its total number of issued equity shares or paid up capital
    5. 5. Pricing Cheap Stock •The value of a stock is cheap if it is trading at a low historical price to earnings multiple but has a high or a rising return on equity. • This means that the company is generating or is capable of generating profits but the current share price is down, given a variety of factors like market conditions, global recession, policy issues etc.
    6. 6. Book Value •Analysts usually use the P/E ratio calculated on the basis the one-year forward multiple which is the expected earnings per share in the span of the next financial year. • Some analysts value stock on the basis of the company’s book value. The book value of a company is – total shareholders’ funds / no. of paid-up equity shares. • The share price as a multiple of book value gives us a price-book ratio. If the multiple is low and prospects for growth are high then the stock is considered cheap. • If we add the net long term debt to the shareholders’ funds, it gives us the Enterprise Value which is normally the price which one will have to pay to buy the entire company.
    7. 7. Impact of Economy •There are some shares that have been trading at discounted prices as compared to their price- book value given domestic and global paralysis and recession. • Any turnaround or change in current economic conditions would help them rise in value and thus, currently make them lucrative investment options.
    8. 8. Conclusion •As buyers or investors, it pays to remember that cost and worth do not mean the same thing. • While cost is what you pay, worth is what you get. When considering buying stocks cheap, do not only consider price - Do consider its worth a few months from now. • If it is worth more, invest in it and strike a bargain. If not, find one that is, buy and hold. Markets are cyclical. • Every low will be followed by a high and it’s a matter of time.
    9. 9. Thank You • READ MORE Twitter Website Facebook
    10. 10. Disclaimer: Kotak Securities Limited, Registered Address: 27 BKC, C 27, G Block, Bandra Kurla Complex, Bandra (E) Mumbai 400 051. Correspondence Address: 6th Floor, Kotak Infinity, Building No. 21, Infinity Park, Off Western Express Highway, General AK Vaidya Marg, Malad (East), Mumbai 400097. Tel no: 66056825. SEBI Registration Numbers: NSE INB/INF/INE 230808130, BSE INB 010808153 / INF 011133230, OTC INB 200808136, MCX-SX INE 260808130/ INB 260808135/INF 260808135 , NSDL IN-DPNSDL-23-97, CDSL IN-DP-CDSL-158-2001, AMFI ARN 0164. Compliance Officer - Mr. Sandeep Chordia. Tel. No: 022 6605 6825. Email id: ks.compliance@kotak.com. In case you require any clarification or have any concern, kindly write to us at below email ids: • For Trading Account related queries: service.securities@kotak.com • For Demat Account related queries: ks.demat@kotak.com. • • Alternatively, you may feel free to contact our customer service desk at our toll free numbers 18002099191 or 1800222299. You may also call at 30305757 by using your city STD code as a prefix. In case you wish to escalate your concern / query, please write to us at ks.escalation@kotak.com and if you feel you are still unheard, write to our customer service HOD at ks.servicehead@kotak.com.

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