Do the following terms sound familiar?
- Only Savers
2. Regular Investors
3. Window shoppers
4. Seasonal Traders
5. Scapegoats
6. Hi-Tech Alecs
7. Cool Investors
Where do you belong?
Does safety matter more at this juncture, or future returns?
Nobody wants to be a scapegoat, so strike that off the list.
Are you well-informed about stock market trends to take a risk, and pump in money at this stage? If you are regular investor, seasonal trader, hi-tech Alec or Cool Investor, you probably have some information to guide you.
The average person who has some surplus funds to invest, but is disappointed with low interest rates offered by banks is looking at the stock market to meet financial goals.
If you invest in direct equity, you are looking around for expert opinion and recommendations.
If you invest in mutual funds, you need to look into the sectors where these funds invest.
COMMON SENSE APPROACH TO INVESTING
We know that travel, hospitality, real estate are the sectors which will suffer in the next one year.
Which are the sectors which stand to benefit from Covid-19?
BEST SEVEN SECTORS TO INVEST IN
Zoom and Netflix are being recommended internationally.
What should Indian investors look at?
1. HEALTHCARE
Hospitals, medical Equipment, Pharma Companies
2. FMCG
Ready to eat, toothpaste, sanitiser, biscuits, dairy, soaps, detergents
3. UTILITIES
Gas, Telecom, Electricity
4. FINANCIAL
Stock exchanges, depositories, asset management companies, brokers
5. MEDIA
News Channels, OTT Platforms (content providers)
6. EDUCATION
Vocational training providers, Coaching Classes
7. TECHNOLOGY
Secure conferencing apps, channels to share confidential data, providers of AI and AR/VR technology will all rule the roost.
HOW DOES ONE IDENTIFY THE RIGHT COMPANIES IN THESE SECTORS?
Experts will always advise you to go with the strong horse.
But in India, we have seen a few so-called strong horses crumble. Dewan Housing, ILFS were all AAA rated companies. The average person on the street could not have imagined a Reliance company in debt traps. YesBank and ICICI Bank were strongly recommended till scandals blew them up.
Investor confidence is badly shaken, and ‘tips’ do not help. Credit rating companies have lost their ‘above thou’ sheen.
There is no option but to get your mouse clicks find sites like MoneyControl, open the balance sheets of companies in different sectors and analyse yourself to arrive at conclusions.
The lockdown time can be utilised to do some research on investments.
WHAT SHOULD ONE LOOK FOR IN BALANCE SHEETS?
1. Debt to Cash Ratio
Why did Mukesh Ambani allow Facebook to invest in Jio? There may be a host of other reasons, but the financial goal is to gradually turn debt-free. He wants sufficient cash to pay off all company’s debts.
Check the following
Is cash plus two years’ profits sufficient to pay off debts, should a need arise? Bankruptcy should not hit like a hard brick.
2. Consistency in Profit & Revenue Growth
This may be a tough condition to apply. But if you see unusual fluctuations, do a google search to investigate what happened around that time, and if the dip was justified. Ensure that it was not revelation of a fraud, or resignation of an auditor or something that indicates trouble brewing inside.
3. Promoters’ shareholding
Not more than 30% of promoter shares should be pledged.
4. Mutual funds’ investments
Mutual funds like Franklin Templeton have been caught on the wrong foot, being invested in unrated bonds. The strategy that worked for the fund manager once upon a time in getting good returns from well-performing, but unrated companies boomeranged.
They are not infallible, but the percentage of MF investments is an indicator of investor confidence.
5. Brand Loyalty
Brand loyalty is shifting. Buyers are likely to stay loyal to companies which helped them during a difficult situation in coronavirus times. Buyers will support these companies to stay afloat, in years to come.
Ratan Tata wins trust and admiration, when he opens up his five-star hotel network to help corona warriors. DMart share prices have gained in difficult times, for the visibility and support they garnered by managing doorstep supply chains.
Companies which are out there to support your needs while you stay locked-in, are future gainers in terms of brand value and intangible assets.
Social media listening can be a strategy to check where is brand loyalty shifting.
Here’s to a more prosperous You, in post Covid-19 times…. Let us learn together and grow together.