How to pick up the right stock is perhaps the most difficult part of trading in the stock market. The second one is of course when to sell it. So here I will like to share with you some of the things I look into to find the right stock. There are a few important things to remember when you are looking for that right stock. First of all you have to make sure that the company you are investing in has a good business, it should be running a type of business that you have a belief in, the one that you think has a lot of growth prospects in the future. The second most important thing to make sure is that the company is profit making. You do not want to end up investing in a company making losses every other quarter. There may come some bad days but largely the company should be profit making and showing growth consistently. The next thing you should look for is that company is largely debt free or at least have a debt to equity ratio under control. The payment of debt eats up a chunk of the profits and really badly impacts the financials. You should always invest in a company that has its debt under control and is doing proper utilisation of its resources. The company should also have a good management looking around the business, the management you can put your trust into. The company should have a healthy promoter shareholding and very less or no amount of pledged shares. This is to make sure that the promoters have their heart and soul into the company. Finally the price to earning ratio of the stock be not so much overvalued that it leaves no room for further growth. You should always look for stocks with attractive pe valuations and what is your opportunity cost.
