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Investing In MNC Stocks


Wealthymatters

Though MNCs shock shareholders occasionally as when they decide to delist or pay hefty royalties, they have always rewarded investors handsomely. In fact, MNCs have been wealth creators for investors across time cycles. Even in turbulent times such as the last three years ended March 14, the CNX MNC index has returned 7.93% compounded annual growth rate (CAGR) against 5.55% CAGR returns generated by CNX Nifty. That is why MNC shares are good for long term investments.

There are some corporate governance issues in this space. But the management quality is good and investors  can consider MNC shares for investment with a three-year time frame.

The CNX MNC index consists of eight different sectors that fall in both — defensive and cyclical segments. Defensive include FMCG, IT and pharma whereas cyclical include metals, industrials, chemicals, consumer discretionary. Defensive MNC stocks do well on the bourses in tough economic times when the overall economic growth is anaemic. Cyclical stocks  suffer  during low-economic growth. So investors can invest in MNC cyclical stocks during downturns to harvest a gain when recovery takes place.  Read more of this post

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Buffett’s 7 Filters


wealthymatters.com

Anybody who has read anything about Warren Buffett knows he is superbly wealthy and has made all his money through his investment in stocks,that he is a value investor,that his favourite holding period is forever and that he loves his companies to have ‘big moats’.Following are a list of parameters that Buffett uses to evaluate companies.They are from the book ‘The Guru Investor’ by John P. Reese.Why not use these parameters to check out a company before buying its shares?

 STABILITY OF EARNINGS:This can be checked by considering the earnings per share (EPS) for the past 10 years. EPS is derived from the residual profit left after payment of all expenses, taxes, depreciation, interest, preference dividends and belongs entirely to equity shareholders. A company should not have a negative EPS in the past 10 years. If the EPS is lower than that in the previous year, the dip should not be more than 45%.

DEBT TO EARNINGS RATIO: The second variable is the level of long-term debt to earnings ratio. Buffett likes conservatively financed companies. He prefers the long-term debt of a company to have been paid off from its net earnings in less than five years. This implies that the long-term debt to earnings ratio should be less than or equal to five.

RETURN ON EQUITY (ROE): The third variable measures how much money a company earns on its equity. The ratio is generally expressed as a percentage. For a company to figure on Buffett’s radar, its 10-year average ROE should be greater than or equal to 15%. Read more of this post

The Right Approach To Long Term Investment Success In The Stock Market


wealthymatters.comThere are many ways to make money in stocks. But not every way works well over longer periods of time.There are people who never make any money from stocks and there are others who make significant amounts of money in the stock market only to lose it again.To understand how to make money from stocks and keep it the long term we need t0 study the habits of investors who have remained successful over a long term.Such an exercise shows that the odds of long-term investment success are greatly enhanced with an approach that embodies most or all of the following characteristics:

  • Thinking about investing as the purchasing of companies, rather than the trading of stocks.
  • Ignoring the daily noise of  the market. As Graham wrote in his classic, ‘The Intelligent Investor‘, “Basically, price fluctuations have only one significant meaning for the true investor. They provide him an opportunity to buy wisely when prices fall sharply and to sell wisely when they advance a great deal. At other times, he will do better if he forgets about the stock market.”
  • Only buying a stock when it is on sale i.e. available at a discount to its intrinsic value.
  • Focussing first on avoiding losses, and only then think about potential gains. “We look for businesses that in general aren’t going to be susceptible to very much change,” says Warren Buffett “It means we miss a lot of very big winners but it also means we have very few big losers…. We’re perfectly willing to trade away a big payoff for a certain payoff.” Read more of this post
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