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

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(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)