[SmartCat]

Originally Posted by 100BHP

Hi, if you put screener based on investment technique outlined by Joel Greenblatt that uses the principles of value investing.
Just want to hear your opinion on above value investing !

Hmm. Almost all stocks in that list are commodity stocks.



Magic Formula works well with companies that have stable revenues and profits. Only BSE and PTC India fit the bill from that list. If you want to pick commodity stocks, make sure price to book value is close to 1.

[carboy]

Originally Posted by 100BHP

Hi, if you put screener based on investment technique outlined by Joel Greenblatt that uses the principles of value investing.

(Market Capitalization > 1000) AND
(Return on invested capital > 20) AND
( Earnings yield >=20)

17 companies list up .

Just want to hear your opinion on above value investing !

This screener does not represent Greenblatt's formula at all (not sure if you have read the book). I had investigated this some months back. You cannot capture his formula in any of the free screeners available for India. You would have to buy a subscription to a paid database & then write a program against the database.

Originally Posted by SmartCat

Magic Formula works well with companies that have stable revenues and profits.

There is no such criteria for the Magic Formula as per the book.

[100BHP]

Originally Posted by LonelyPlanet

Which are these 17 companies ?
Which site are you using to apply these filter on

screener.in - pls check this

[100BHP]

Originally Posted by SmartCat

Hmm. Almost all stocks in that list are commodity stocks.

Attachment 1869186

Magic Formula works well with companies that have stable revenues and profits. Only BSE and PTC India fit the bill from that list. If you want to pick commodity stocks, make sure price to book value is close to 1.

So, how to go about value investing ?

[SmartCat]

Originally Posted by 100BHP

So, how to go about value investing ?

I have 2 screener settings. If the list is too long, reduce it by increasing the market cap.

Dividend Yield Stocks

Market Capitalization >100 AND
Dividend Payout Ratio >15 AND
Dividend yield >4

Value Stocks:

Market Capitalization >100 AND
Dividend Payout Ratio >15 AND
Dividend yield >3 AND
Price to book value <1

This is just an initial screener. You have to analyze each stock individually before buying.

1) Avoid PSU Banks
2) Look at last 10 year data and avoid stocks with inconsistent dividend payout ratio (that is, DPR should be >15% every year)
3) Look at last 10 year data and avoid stocks that frequently swing into losses
4) Avoid stocks with high debt to equity ratio (>1)

[sunilch]

Originally Posted by SmartCat

Dividend Yield Stocks

Market Capitalization >100 AND
Dividend Payout Ratio >15 AND
Dividend yield >4

While this is purely the prerogative of each individual, don't you think that dividend yield of >4 is actually quite high?

1) Only companies with slow growth but working in very mature markets and having sort of a monopoly will be able to give you such a high yield. Number of such companies is actually limited to be honest.
2) If the markets are high and so is the said company, actual yield of such companies is way more than 4. Capital appreciation of companies with very high yield are very limited usually.
3) If the said stock is not doing well and has a low price when you see a >4 dividend yield, then the yield figures could be deceiving as it gets boosted by the lower price. Going forward the yield is likely to reduce either due to increasing price (which should be ok) or reducing dividend payouts (which will not be ok).

Not discouraging anyone from setting their yield expectations, just curious to discuss more on this.

[100BHP]

Originally Posted by SmartCat

I have 2 screener settings. If the list is too long, reduce it by increasing the market cap.

Dividend Yield Stocks

Market Capitalization >100 AND
Dividend Payout Ratio >15 AND
Dividend yield >4

Value Stocks:

Market Capitalization >100 AND
Dividend Payout Ratio >15 AND
Dividend yield >3 AND
Price to book value <1

This is just an initial screener. You have to analyze each stock individually before buying.

1) Avoid PSU Banks
2) Look at last 10 year data and avoid stocks with inconsistent dividend payout ratio (that is, DPR should be >15% every year)
3) Look at last 10 year data and avoid stocks that frequently swing into losses
4) Avoid stocks with high debt to equity ratio (>1)

1. 100 crores is your actual screener value - means it is OK to invest in such micro companies ?
2. What about your other screener values : Return on equity >15, Price to Earning <20
3. ROE or ROA ?
4. ROE or ROA 5 year > 20 - is it useful ?

[SmartCat]

Originally Posted by sunilch

While this is purely the prerogative of each individual, don't you think that dividend yield of >4 is actually quite high?
Not discouraging anyone from setting their yield expectations, just curious to discuss more on this.

Low PE, Low PBV, high dividend yield - this is the classic definition of value stocks, as explained by Benjamin Graham. These days, stocks trading at 50 PE is described as "value" because their profits are growing at 40% per year.

Even at 4% yield, you can pick up solid brands like CASTROL INDIA. The idea is to generate 10% to 15% plus capital appreciation and 4 to 6% yield. Net net, you should be able to generate 15 to 18% returns over the long term.

[prashkul]

Any recommendations on liquid funds? I'm looking for least risky funds that give better returns than FD. I already have some put into balanced funds, apart from equity funds and stocks.

[SmartCat]

Originally Posted by 100BHP

1. 100 crores is your actual screener value - means it is OK to invest in such micro companies ?
2. What about your other screener values : Return on equity >15, Price to Earning <20
3. ROE or ROA ?
4. ROE or ROA 5 year > 20 - is it useful ?

1) I'm comfortable investing in microcaps. But it is not for everybody. You could set a filter for Rs. 1000 cr or Rs. 10,000 cr minimum marketcap

2) RoE>15, PE<20 is my filter for picking growth stocks.

3) RoE is the right metric. RoA is useful metric for comparing banks.

4) Looking at 5 year RoE data is useful. Note that if you select minimum RoE as 20, you will eliminate pretty much all the financials and banks. That's why set minimum RoE at 15%

Originally Posted by prashkul

Any recommendations on liquid funds? I'm looking for least risky funds that give better returns than FD. I already have some put into balanced funds, apart from equity funds and stocks.

Check mutual fund thread:
https://www.team-bhp.com/forum/shift...hread-160.html (The Mutual Funds Thread)

But remember that if you want more returns than FDs, you have to take more risk. Risk return trade-off:

[sups]

Originally Posted by prashkul

Any recommendations on liquid funds? I'm looking for least risky funds that give better returns than FD. I already have some put into balanced funds, apart from equity funds and stocks.

ICICI Pru Liquid Fund Direct(Growth)

[kablu]

Dears,
I'm a new investor and looking to do stock trading to generate passive income. Please share some resources to gain stock trading knowledge and get updates. Currently most of the terms used in this thread looks alien to me. However, I'm pretty much interested in learning these things.
Thanks in advance.

[joslicx]

Originally Posted by kablu

Dears,
I'm a new investor and looking to do stock trading to generate passive income. Please share some resources to gain stock trading knowledge and get updates. Currently most of the terms used in this thread looks alien to me. However, I'm pretty much interested in learning these things.
Thanks in advance.

Stock 'trading' is not ideally the right way to generate 'passive' income! On the contrary, you might lose lot of money in trading if you are a newbie.

You generate passive income mainly via dividends so the right way is to invest in companies that generate free cash and believe in sharing it with their shareholders. Then you just sit tight on them for decades. At some point some of these companies could give you annual dividends that are comparable to your initial investment.

So my advice would be to find some great companies and just buy them and forget! Great companies are those that you see around yourself everyday, whose products you use and whose brands you like (for example, Fevicol)

[carboy]

Originally Posted by joslicx

So my advice would be to find some great companies and just buy them and forget! Great companies are those that you see around yourself everyday, whose products you use and whose brands you like (for example, Fevicol)

A great company may not necessarily be a great investment or even a good investment. A lot of investing books spend time explaining this.

[Ferrari1976]

After having tried most of the valuation methods to identify stocks with highest return potential, I eventually ended up developing my own model. I call it "Expectations Value Model".

I have a started a blog on this and you can read it at: https://expectationsvalue.blogspot.com

Do read and let me know your feedback.