Friday, January 19, 2007

The dos and don'ts of buying stocks

So you've made up your mind to invest in the stock market. Having overcome initial inhibitions, you're now looking to become a millionaire overnight. After all, if your friend A or your cousin B could do it, why not you?
For investment-innocents, here's a shocker: It is not where you invest your money, but how you invest it that decides the profits. That is to say, stocks are only as good as the investor; they respond to the individual's abilities and acumen. In that sense, stocks are quite distinct from consumer durables. You can reasonably expect a washing machine to perform as well for you as for your neighbour, but that is not the case for stocks, which are a different breed altogether.
So, instead of investment tips, here are some attitude tips.

Don't commit large amounts of money or short-term money. Even if you can afford to take risks, we suggest you don't commit large sums of money - at least not in the initial stages. It would be wiser to start with small amounts and increase your investments as your confidence and grasp of the markets grows. It is not easy to pick up the right stocks or keep track of them when you are starting out.
Also, don't break FDs to invest in rising markets. Always invest the surplus, money for which you have no immediate plans. Equity, as an investment, carries in-built risk and volatility and investing short-term money may force you to quit at the wrong time.
Do be sceptical of self-proclaimed experts. As an investment ing�nue, stay away from self-proclaimed experts or overzealous advisers. The so-called 'hot tips' they offer to investors are largely short-term trading tips, which are very risky for a retail investor. Because the reaction time is limited, chances are you will end up losing wealth.
Similarly, TV gurus and the like are forever ready with "buy" recommendations; few, if any, come out with "sell" advisories for your advantage.
Further, expert recommendations often have vested interests. Recently, market regulator Securities and Exchange Board of India fined an expert for acting exactly contrary to his own recommendations. To curtail such rogue elements, the market regulator is planning a law to govern experts, who comment on the markets in the mass media.

Don't trade for short-term. Short-term trading or day trading is very risky and not recommended for retail and small investors for two reasons. First, it requires lot of time, which small investors can rarely spare since it is not their primary business. Second, retail investors may not have the necessary skills and tools required for short-term and day trading. Do not try to time the markets: it's one of the most difficult things to do.
Invest long-term in fundamentally strong companies. Our advice to retail investors is to invest long-term in fundamentally strong companies. Give your portfolio adequate time to grow. Do not panic in technical corrections. If you are invested in fundamentally strong companies, you are safe. We saw two sharp corrections in 2006, first in May-June and again in December. On both occasions, the market bounced back and crossed previous highs because the fundamentals were intact.
Don't ignore stock fundamentals. There is no set formula for fundamental analysis. You have to study various indicators like sectoral growth, company growth - both top and bottomlines - and various ratios like price to earning ratio, price earning to growth, dividend yield, book value, price to book value, price to sales ratio, debt-equity ratio, return on capital employed, to name just a few.
If number-crunching is not your cup of tea, you must still investigate the nature, business and size of the company and its growth in the last three years - sales, profit and earning per share - all of which are accessible on the websites of stock exchanges.
Do not be tempted to buy small caps and penny stocks. The risk involved in small companies is huge, but higher risk may not necessarily lead to higher gain. That is not to say that you should ignore small companies completely, but at the same time you must have solid reasons for buying into them. And when you do, make sure they are only a small portion of your portfolio.
Do be critical of media reports. It's tempting, when you are just about beginning to follow the jargon, to buy into glowing media reports about corporates. But they could be misleading. For instance, you may read of a company setting up a new plant. Such announcements usually push up prices in anticipation of earning growth.
Before you join the queue for their stocks, you need to understand the cost benefit of the new plant. Ask yourself a few questions: where is the money coming from�equity or debt? If it's equity, how will it impact the EPS in the near future? If the source is debt, is the company in a position to leverage the increased debt? What will be the gestation period? When will the earnings really start coming in? What will be the return on capital employed?
Don't follow other investors blindly. People often talk about their success in the stockmarket, rarely of their failures. Your friend may have made money in the past, but there's no guarantee he will continue to do so in future.
If, however, he offers to share his stocks research with you, welcome the opportunity. It will help you build your own research, but remember it is not a substitute for your own investigation.
Do stay away from a large number of stocks. Investors generally hold a large number of stocks in the name of diversification. But this may not always be the case.
Harry Markowitz, known as the Father of the Modern Portfolio, warned investors: "Holding securities that tend to move in concert with each other does not lower risk." A truly diversified portfolio, he said, comprises non-correlated asset classes that could provide the highest returns with the least amount of volatility. If you are still looking to diversify within equity, do not go in for stocks of more companies than you can track regularly. Seven to 10 would be ideal, though, of course, this is a highly individual call. The biggest disadvantage of holding a large number of stocks is failing to quit at the right time.

Tuesday, January 16, 2007

Wipro Q3 net surges 9.25% at Rs 765 cr

Wipro has come out its third quarter results of financial year 2007. The company posted net profit of Rs 765 crore (Rs 7.65 billion) in the third quarter versus Rs 700.2 crore (Rs 7 billion) in the previous quarter, up by 9.25%.

Its revenues was up 12.2% at Rs 3,979 crore (Rs 39.79 billion) from Rs 3,546.2 crore (Rs 35.46 billion) QoQ.

Its global IT revenues was up 5.69% to Rs 2875.5 crore (Rs 28.75 billion) from Rs 2720.5 crore (Rs 27.20 billion) QoQ.

The global IT margins stood at 24.2% for the December ended quarter versus 24.4% in the previous quarter. The company reported OPM at 23.55% versus 22.88%.

Wipro's Q3 results was above the street expectations.

The company's BPO revenues reported at Rs 235.8 crore (Rs 2.35 billion) in the third quarter as against Rs 229.9 crore (Rs 2.29 billion).

In the third quarter, Wipro added 37 clients versus 54 clients in the second quarter and 3500 employees added as against 5328 in the previous quarter.

Operating Profit Margin

Q4FY06: 25.07%
Q1FY07: 24.56%
Q2FY07: 24.4%
Q3FY07: 24.22%

Net Profit Margin

Q4FY06: 19.85%
Q1FY07: 19.73%
Q2FY07: 19.74%
Q3FY07: 19.22%

Wednesday, January 10, 2007

Infosys Q3 2006-2007 results - seen a growth of 5.91% in revenue

The Company has posted a net profit after tax & exceptional items of Rs 9580 for the quarter ended December 31, 2006 as compared to Rs 6420 million for the quarter ended December 31, 2005. Total Income has increased from Rs 23960 million for the quarter ended December 31, 2005 to Rs 35140 million for the quarter ended December 31, 2006.The Group has posted a net profit after tax, exceptional item and minority interest of Rs 9830 million for the quarter ended December 31, 2006 as compared to Rs 6490 million for the quarter ended December 31, 2005. Total Income has increased from Rs 25270 million for the quarter ended December 31, 2005 to Rs 37140 million for the quarter ended December 31, 2006.The company reported net profit at Rs 983 crore (Rs 9.83 billion) in the third quarter, up 5.81% versus Rs 929 crore (Rs 9.29 billion) in the previous quarter.The company's revenues were up 5.91% at Rs 3655 crore (Rs 36.55 billion) versus Rs 3451 crore (Rs 34.51 billion) QoQ.

Infosys added 43 new clients in the third quarter and net employees addition were 3282. The BPO arm has seen 20% QoQ growth.Infosys Guidance Q4 Revenues seen at Rs 3789 - 3798 crore, EPS at Rs 17.88 FY07 Revenues seen at Rs 13910 - 13919 crore, EPS at Rs 66.63

Wednesday, January 03, 2007

Yahoo! Finance Badges: Add Stock Quotes To Your Blog

The much hyped Google Finance service has failed to overtake Yahoo Finance and now Yahoo is adding new features to continue maintaining that winning lead over Google Finance.

Yahoo Finance today introduced a free service that allows bloggers to embed live financial data from Yahoo Finance like Stock Charts, News and Quotes into their blogs or websites.

Using a wizard, you can type in the Stock Symbol(s) and choose the time range of the market chart - yahoo then provides you with a small iframe HTML snippet to insert in your website.

The dimensions of Yahoo! Finance Badges are especially tailored for putting them in the sidebar of blogs.

Going forward, Yahoo may integrated ads into the Yahoo Finance OneBox and share advertising revenue with the publishers. That will very likely boost the adoption rate of Yahoo Finance Badges. I think it's also a threat to Amazon Link Boxes since the sizes and implementation is very same.

Here's a live preview of Yahoo Finance Badges in action that compares stock prices of Google, Microsoft, Yahoo and Adobe.