How To Pick Stocks For Analysis?


Before investing in a stock, you need to find a stock that looks interesting for analysis. In this article, I try to articulate the various ways in which you can find interesting stocks around you. The various ways are:

1. Observation:

Keep your eyes open, observe generally what brands people are buying when you go shopping. What is the trend in the market around cars, around houses? Are people in your neighbourhood buying sedans or SUVs? Are people buying from GAP or Lacoste? Being a quite observer gives you a great insight into what all products and services are gaining momentum in your hemisphere. Once you notice a trend, you can go ahead and analyse the particular company’s stock that is leading the trend.

2. Macro Trends:

As we know that Union Budget is around the corner, we can expect that there would be a push on rural development and infrastructure development in the economy. So, this allows you to narrow down your stock picks to the company’s which will be the beneficiaries of the macro trend.

3. Sectoral Trends:

To catch a sectoral trend, you need to continually follow the sector’s news and developments. For example, in the traditional automobile sector, we know that there is a push towards E-vehicles by the government, so you can research the stocks of the beneficiaries of this push by the government.

4. A Unique Situation:

At times, a unique situation arises, which gives you an idea about the performance and future prospects of a particular share. For example- Azim Premji invested a 2.2% stake (703 crores) in Aditya Birla Capital in July 2017. This kind of a development raises an interest in the particular company’s prospects.

5. Circle of Competence:

You can identify stocks in your professional domain as well. You know the ins and outs of the industry and might also have an idea about the future trends coming up in your industry. This is a good technique to pick stocks for beginners.

Once you select a few stocks, you can add them to your watchlist and track the daily news related to them. In the next article I will discuss the first steps on analysing your first stock.

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Author | Akanksha Goel