Investment Philosphy

How to select a Share like a “Value Investor”

Earn Money

Normally, we hear a Value Investor talking about lot of factors which one needs to consider while selecting a share like reading 5 years’ annual report, following up the market news, giving due consideration to P/E ratios, looking after market capitalization, considering book values etc. But it becomes really difficult for a normal investor to keep himself handy with all these. Surely its a good thing that you know as much as you can  about the shares of your interest but its always not possible for a normal investor. Neither you have to study the concrete annual report with a thorough concentration and go deep in every bit of details.

Here, I have contoured around a few points which you should consider if you can not follow a share like a Value Investor and still can earn good returns:

a.) P/E Ratio: Its one of most important factors which one should consider while buying the company. You should check whether it is high or low for a particular company and for the similar companies in the same industry.

b.) Institutional Ownership: You should check percentage of Institutional Ownership in a company before buying it. As the lower it is, the better it is. It will save yourself from speculations.

c.) Insider Buying: Its a pretty good factor while buying a company. If insiders are buying in a share then you can believe this share has good potential to go up. Insiders are the people who work in the company probably on higher post.

d.) Buy Back: If a company itself buying back its share from the market then its a good sign for a company.

e.) Earning Growth: If the company’s earning is increasing consistently; its a good sign for the future of the company & its shareholders. If its earning growth is around 15-25% per year then you have found a gem which you were looking for. But if you found a company whose earnings are growing around 50% per year then its a matter of concern because sustaining such a high growth is tough.

f.) Debt to Equity Ratio: You must check whether a company has good balance sheet or a weak balance sheet. You must check its debt to equity ratio; the lower it is the better it is.

By considering the above points while choosing a share you can surely buy a good company which can give you ample return. Definitely you have to have patience for getting good return and by being patient i am talking about 3-5 years at least. To gain good return you have to stick with your company as you own a part of the company itself.

I agree with the great Value Investors that we must read the annual reports and go deep in the company but there are lot of investor who normally don’t go in such details and the above points could prove to be fruitful for them.

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Happy Investing!!

Vikas Agarwal
the authorVikas Agarwal
Vikas Agarwal is an IIT-Varanasi graduate in Chemical Engineering. He is the Founder and CEO of - an investment advisory website. He is a Business Development Professional but a Value Investor at heart. He writes articles on Finaacle, which focus on simplifying the art of investing and the causes of human misjudgment when it comes to investing. He also shares his experiences as an investor and lessons from some of the greatest investors of all time.

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