How to select stocks for your long term portfolio :
A Thread 🧵⤵️
(i) Selecting the sectors
(ii) Selecting the companies
(iii) How to review and decide
(iv) Perfect time to exit/pyramiding
Do Like and Share to help us educate maximum investors.
(1/n)
(i) Selecting the sectors :
• Sectors which are unaffected due to any slowdown or in other words, non-cyclical sectors should be preferred.
• Which are having good demand of their products / tailwinds in their favour. IT/Pharma is the recent example.
(2/n)
• Govt. policies in favour of the sector by imposing any duties or providing incentives to the industry.
• Always check for proxy plays, Example :
- Realty boom - Building materials, Appliances, Cement (Proxy)
• Sector which is the need of the hour - Renewables.
(3/n)
(ii) Selecting the companies :
• 2 ways to select the companies :
- Based on past financials / historical data
- Estimating forward valuations
• By analysing past data, you can identify the company which performed the best, can be classified as the leader.
(4/n)
• Companies with consistent higher OPM, RoCE, RoE and OCF conversion are considered good for investing.
• For example, leaders in various sectors :
- Diagnostic - Dr Lal Pathlabs
- Amines - Alkyl Amines
- Cement - Shree Cement
(5/n)