8 Methods of Stock Picking: Value Investing Lessons from Benjamin Graham

8 Top Stock Picking Methods from Benjamin Graham

Stock Picking Method # 1: Deep Equity Research

  1. How: Series of comparative analyses industry by industry.
  2. What: Identify standard characteristics of an industry. Locate companies which deviate widely.
  3. Next: Study these more intensively (qualitative and quantitative factors).

Stock Picking Method # 2: Wide Stock Screening

  1. How: Quick glance at hundreds of snapshots.
  2. What: Pick 5 or 10 that look interesting enough from the earnings or current-asset standpoint.
  3. Next: Study these more intensively (qualitative and quantitative factors).

Stock Picking Method # 3: Superstar Stocks in Volatile Market Conditions

  1. Find normal level: 7 year average earnings of BSE Sensex or NSE Nifty * 2 * 1/bond rate.
  2. Buy: Start buying diversified portfolio at 20% discount. Scale till 33% discount.
  3. Sell: Start selling at 20% premium. Scale till 33% premium.
Growth vs Value Investing

How to Build a Stock Portfolio that Finally Gets Results

1. There are many different ways you could approach investing. In my limited knowledge though, you simply won’t find a better investing framework than Ben Graham’s.

2. You will find Peter Lynch’s investment framework highly accessible. If you are just beginning, you could start your journey with his book One Up on Wall Street. He explains the qualitative part very well. Sadly, the quantitative part is sketchy.

How to Read a Balance Sheet: HUL

Last time, we saw that HUL has a negative working capital and that the number has ballooned over the years. We saw how creditors are actually a source of finance for the company.

Now, let us take it forward.

Is HUL’s sales growing? Can we easily relate it to the company’s balance sheet? If yes, how. If not, what else to look at?

How to Learn Value Investing in a Simple Way?

Recently Parth asked, “How to learn value investing in a simple way?”

With his permission, I’m sharing this with all fellow value investors.

Hello Sir,

I am new to investing, in a learning phase, most unfortunate to be in science field. But I am trying to learn the fundamental theme of the value investing. Net profits, EPS, PE, book value, debt equity ratio.

Now what baffles me are the concepts of DCF, FCF, Margin of safety and Intrinsic value.. I have been googling this since months but not able to find something which is easy to understand. Please throw some light on these subjects. And also suggest some books through which I can get it in layman terms.

How to Read a Balance Sheet: HUL

In the last blog, we took the first few steps in learning how to read a balance sheet. Here’s a recap of what we did last time. We asked the following four questions:

  1. How much money have the owners put in my company?
  2. Where was the money put?
  3. Can I recreate the same assets using the original money?
  4. Where do I find all this information?

Today, let us use HUL as a practical example to see how to take the process ahead.

7 Steps of Value Investing: How To Pick Stocks For Your Portfolio

There are 7 steps of value investing by which you can successfully pick Indian stocks for your portfolio. They are:

Step # 1: Plan Your Overall Finances

Before you even think about investing in Indian stocks, first review your finances. Here are some ideas on how to plan your financial future.

Step # 2: Generate Lots Of Choices In Stocks

Generate lots of choices from which to select suitable stocks. Here are some ideas on how to generate great choices in Indian stocks.

Why I Bought SAIL, BHEL and Shipping Corp Stocks

Recently bought SAIL stock for the first time. Also, bought more shares of BHEL and Shipping Corp. A quick rundown of the thought process:

4. Is cash still the king? Is it really a good idea to park all your savings in bank fixed deposits? Your capital is unlikely to evaporate but it will not grow either. Is it not a better idea to own companies instead?

You could buy a broad basket of prominent Indian stocks, i.e. an index. But if you are okay with doing some homework, why not stuff your basket with only the truly attractive ones?

3. Scared or excited? Should you wait for a further decline in the stock prices of SAIL, BHEL and Shipping Corp? They already are at multi-year lows.