While searching Nifty50 stocks for safe investment ideas, we thought that what benefit could be derived, if all stocks were ranked according to a few important stock analysis parameters like –
- Earnings Yield (Inverse of P/E Ratio)
- Return On Capital
- Price/Book Value Ratio
- Debt/Equity Ratio
- EBITDA Margin
- Net Profit Margin
- Dividend Yield
We did the dirty part of ranking and the result is evident in table below. All the stocks have been ranked on all 7 parameters.
We have also summed up these 7 ranks to arrive at a cumulative ranking (which might be totally useless: but a good starting point for shortlisting stocks).
Note- Numbers don’t tell everything. So this should not be taken as a buy or sell recommendation.
Note – We have removed the banking stocks from this list.
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Some of these stocks (with more green than red) can give good returns in the long run. However, there’s a caveat: A better rank does not mean that the stock is investment worthy. Individual stocks with higher ranks could still be much better Buys than ones with lower ranks.
You can also read our comprehensive analysis of Indian markets & P/E ratios, P/BV ratios & Dividend Yields.
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As soon as I see those RGB colors, I am thinking this is from Moneyworks4me. Please tell me this is from that website.
Only one issue is that they change the color in a heartbeat. Mannapuram Finance was a Green on current scenario and a Green on Future prospects. One news came about the possibility of them accepting cash for other businesses, the stock price went down (Mr.Market reacted as usual) and their entire fundamental research changed. This has happened to couple of other stocks as well.
You can use these readymade stuff only to go through the numbers, there's no math to check management fundamental etc.
@Mansoor
Actually No. The colors have been rendered by a simple tool called Conditional Formatting in MS-Excel.So this is definitely not from that site. 🙂
And we agree with you that these type of lists are only good to look at. We would like to mention it that one must be cautious before looking at such lists. These only provide good starting points to further shortlist good stocks.
Hi!
While I found this blog to be very useful and different from other content, I have a few inputs – please ponder if you see any worth ..
1. As exhaustive as the sheet is, SESA right there at the top? This stock has not gone above its 200 DMA (let us just take that as a technical reference as that is the bare minimum that even FA guys look at) – corp action adjusted (or even otherwise) since Aug 2010. And we all know it is under legal trouble! This seems to be a big deviation from the present-time-as-we-know-it scenario.
2. To sum up rankings is thee most arbitrary thing to do! Based on historical evidence, perhaps doing a weighted average of the 7 parameters would put things in better light.
3. It is evident in the blog that the authors tread on the path of great investors of our time like buffet. And one of his principles is to look at stocks which are on nobody's radar for long term investment. When I look at the list above, almost all stocks are mid or large cap, had hit a lifetime high in the 2008-09 period and are well known – how about today's small caps which will be tomorrows large caps?
4. Since long term investing is the subject of discussion of this blog, it would be good to have an inflation adjusted rate of return reported for all historical data as well as future speculations – gives a cleaner picture!
You guys are otherwise doing a great job! Keep it up!
@Anonymous
First of all thanks for all the good words you have for Stable Investor. We would have loved if you had left us with a name to thank here. 🙂
1) We agree that Sesa Goa being on top of our list, even after having number of issues (as highlighted by you) seems a little odd. But the company is on top because it obtained top ranks in almost all parameters which we considered. We also mentioned that numbers don’t tell everything. For example, a mining company trading at a PE of 12 is almost always overvalued. But a FMCG company trading at a PE of 20 cannot be said to be highly overvalued.
2) You are again right that cumulative ranking is not of much use. But this is what we also meant when we said that it is “totally useless: but a good starting point for shortlisting stocks.” What this ranking does is that it forces an investor to look at parameters which are essential for preliminary analysis of stocks. After that, it is all about doing the hard work.
3) We would love to find stocks which are bound to become tomorrow’s large caps. But as of now, we are focused more on building the core of our portfolio. And we would prefer to limit the downside before we start thinking about finding the next multibagger. And as per our risk appetite, we have decided to stick with large and mid cap stocks for the time being. As of now, even we are learning from markets, our own mistakes in the past, other people’s mistakes and of course from the gurus like WB, PL. Hopefully, we would soon be in a position to find the next great stock 🙂 But rest assured, we would keep sharing everything we learn or unlearn in the markets through Stable Investor.
4) Point noted. We would try to incorporate what you suggested.
Thanks for your valuable inputs 🙂
I have been reading your posts for a while and always found one very important factor missing: Sectorial Analysis.
Currently, some sectors are facing the downturn of the cyclical nature of their businesses. Metals, Capital Goods, Realty, Housing Loans companies should be treated differently. No matter how low the ratios are there is little hope for them to give positive returns in the near future.
The focus of analysis would best be on sectors that are neutral to strong. Like, IT, Banking, Energy, Auto.
Yes. Some sectors may not see brighter days for years it seems. We will try to cover and analyse some better companies/sectors soon. Recently we tried our hands at analyzing IDFC. But we will also stick with what we understand. No point posing ourselves as experts when we are still learning from Mr. Market.
I agree to what Mr. Mansoor has said. The color coding looks pretty similar to moneyworks4me.com 10 year xray color coding where they identify each stock as great. good or risky based on its 10 year financial data. This tool has relly helped me identify some of the great stocks to buy from NSE & BSE.
Hey Lalit
As already mentioned in my reply to Mansoor, these colors are easy to get for someone using MS Excel. Nevertheless you are correct that color coding does help in doing a preliminary evaluation of stock fundamentals. 🙂
These days even the Mutual Funds come color coded.
How about an auto update of this on a excel sheet (download). Like Pattu do. 🙂