Digitising thoughts

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What to buy now?

Posted by Sathyamurthy www.sathyamurthy.com on July 1, 2008

When greed is high one has to sell and when fear is high one has to buy is a wise advise from share investment gurus.

Still the problem remains of identifying what to buy and what to sell during fear and greed times. Easy way out is to look for the underlying value offered by the scrips. That will help you to get out of the useless scrips that have multiplied due to greed and fantastic scrips that get undervalued in times of fear.

Since the current market is one of fear, it makes sense to look for some valuable buys. I am not going to specify here what to buy. Rather, I am trying to give a guide for selecting the scrips:

a) Low Debt Equity (when rates are going up, these companies will be least affected)

b) Market leaders in their business (irrespective of the market condition, they will continue to stay on top)

c) Continuous dividend record over a period of say 6 to 8 years (this might exclude new companies but it is better to go for some company with a track record than some thing that is still not proven). Six to eight years track will help us to identify the consistency over a period of time by which one can expect a company to have seen one bad cycle and one good cycle.

d) A company may have a policy of not distributing dividend and instead use that cash to fund their business. One can identify such companies by looking at continuous period of profitability (once again 6 to 8 years)

e) See the book value, market price and 52 week high and low besides what was the price of the share before the bull cycle started. How far or near is the current price to that price? If the business has grown from the time bull run started and the price has gone back closer to the price at the beginning of the bull run, it is a must buy share.

Happy investing!

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