Choosing a stock simplified

by khalid on 01/09/2011 · 0 comments

There is no golden rule to choose a stock and if there was one then life would have been totally different. There are various factors provided by Graham & Dodd that one should consider while buying a stock. These factors can help a person get good gains in the markets.

Some of the companies which have been listed below are considered to be good buys by the Business Standard. We will here try to understand why they have been considered good buys. All the factors which have been used to understand the stocks are according the rules of Graham & Dodd and also from some leading brokers and researchers.

We will mainly go by the norm of P/E multiple of 12-14 and P/BVPS of 3, if we go by these norms then only Reliance, ONGC, and Tata Steel are considered to be good buys. The other companies whose P/BVPS and P/E multiple are higher have higher interest cover. The companies which have low interest cover but have a high P/E Ratio and high P/BVPS are not recommended as per the Graham & Dodd factors taken into consideration. So we miss out on L&T and Coal India and Bharat Petroleum is considered to be a marginal case. The readers can try out the same experiment with separate companies.

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