#Investing Basics: How to gather information on Indian stocks?
One of the subscribers to the blog asked me how I go about researching a company. Once you’ve shortlisted a stock, you want to read about the company’s business [and future outlook] to understand whether it has the potential to multiply your investment.
But, the act of research itself is not easy. We’re bombarded with information, and because of that we lose track of what matters. You need sources that can provide valuable information without you getting confused.
You need to look at a lot of different sources so that you can have an objective view of the business and incorporate different perspectives into your analysis.
When I started researching stocks around 2 years back, I didn’t know where to look and what to look at while analyzing companies. I used to read a few articles on business websites [Economic Times / Moneycontrol / Mint] but that would not help set a concrete picture in my mind.
In this article, I will list down some of the sources of information available to investors while engaging in the act of research — so you know where to look. In the next few articles of #InvestingBasics, I will cover what to look at.
I. Company sources
This is the original source of information about a company. You can refer to the following documents:
Annual Report — this is a comprehensive report which covers the performance of a company for a particular year. You can refer to the ‘Management Discussion & Analysis’ section of the report to gain a deeper insight of the company’s business and the broader industry it operates in.
However, not every company provides comprehensive information in their annual reports. This is specially the case with a lot of micro-caps / small-cap companies.
For e.g. while researching about Gujarat Toolrooms, I went through it’s annual report and I couldn’t find ANYTHING about the business! It was so vague. In fact, if you read their annual report, you will scratch your head as you would not understand what business they’re doing to make money. This is a typical red flag to look out for.
Quarterly earnings transcripts / calls — one of the best ways to track the progress of a company’s business is to read their quarterly earnings call transcripts. You find what’s happening. The direction a company is going towards. New strategies. Future targets. Expansion plans. Whether targets are being met. Plus, you find whether the management is competent to run the business.
For e.g. if you take the case of Olectra Greentech — every quarter, they give an oversized forecast of the # of electric buses they will deliver in the future quarters. But, if you track the upcoming quarterly results — you will find that the management seldom delivers on its forecast and misses it by a BIG margin, which tells you to take the management’s forecast with a grain of salt.
The quarterly earnings call transcript is an indispensible tool for an investor, because as investors you are dependent on a company’s management to run the show. And through this earnings calls, you can track the management’s performance + gauge how a company is being run.
Investor PPTs — investor PPTs are released alongside the quarterly earnings calls for a more visual representation of data. These help summarize a lot of vital information about the company.
You can download these reports either from the company’s website OR you can use screener.in
II. External Sources
Reading stuff put out by the company is important, but if you only read that — you’ll not have a 360 degree view of things. It is very important to explore other perspectives and see how other investors / analysts view a company.
ValuePickr Forum — for indian listed companies, I think this forum engages in comprehensive discussions and you get exposed to varying view points. Plus, in case of micro-caps / small-caps where you don’t find a lot of information released by the company, these forums help to understand the business in more detail. I routinely use this forum to understand the risk factors in a company.
Synthesizing different viewpoints, is one of the markers of a good investor.
Credit Rating reports — in case a company has taken term loans from a bank, working capital limits etc, they have to get it rated by a credit rating agency [ICRA, CRISIL]. These credit rating reports can alert investors in case there is a ratings downgrade. Plus, these reports talk about strengths / weaknesses in a company and is a good source of information about what analysts are thinking.
These can be downloaded directly from screener.in
BSE / NSE filings — Companies have to file a lot of information with the exchanges and through the ‘Corporate Announcements’ section on these websites you can find a lot of information about the latest developments in the company.
I generally use these websites to find out contracts / orders won by the company, to get an understanding of a company’s order book.
Other sources of information — apart from the above, if you still want to read more about a company, these are some good external sources:
Equitymaster.com — I’ve been a loyal subscriber to their premium equity research products and I really like how they identify opportunities. They don’t cover every stock in detail, but it is worth a search to find out what the investment team at Equitymaster is thinking.
Dr Vijay Malik — Dr Vijay is a doctor by profession, however I can go out on a limb and say that his analysis is WAY better than your normal buy side analysts. The best part, his blog is completely free. Again, he doesn’t cover every stock, so you might not find details of a particular stock that you’re researching on.
His articles on sectoral analysis will help you understand how different industries function.
Mainstream Media — I have subscribed to ET Prime / Moneycontrol PRO which release research reports on various companies. They often release articles doing in-depth research, however most of these are mainstream stocks and you’ll not make much money once everyone knows about an opportunity. Regardless, they publish verified information and are very useful when you’re tracking recent developments of a company.
Once you know where to look, you speed up the process of stock analysis. In the next few articles, I’ll cover WHAT you should look at when you’re researching about stocks. Stay tuned! 🚀
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[Note: The author is not a SEBI registered investment advisor and the contents of this article do NOT constitute investment advice. Always do your own research before you invest in a company]