STOCK MARKET STRATEGY

Stockmarket Investing

Below I have in my own amateurish way attempted to formulate a framework for investing in the Stock Exchange. I invite all interested visitors to add to the below and comment on those points which are not required or are erroneous...Thanks!


· Identify the right industry based on
o growth prospects
o valuation
o risk
o return
o short term(less than 6 months), midterm(6-24 months) or long term(2 year + )

· Identify the firms in the industry and understand
o The economics of the industry – whether oligopoly, monopoly, perfect competition etc
o Degree of concentration and /or fragmentation
o Porter model of 5 forces – rivalry, bargaining power of suppliers and buyers, threat of substitutes, barriers to entry
o Current segment of operation and possible new segments
o Supplier and customer industry study
o Govt policies regarding industry
o Life cycle of the industry
o Dependence on inputs like capital, labour, R&D, energy etc
o Dependence on economy – interest rates, inflation, CRR, GDP, trade, Strength of rupee, etc
o Benchmarked status against market leader on various parameters

· Whether that particular stock is
o Undervalued or overvalued
o Annual report analysis
o Financial Ratios
o Any other Correlations for eg. sensitivity to other indices etc

· Investor rationality index regarding a particular industry - how rational is the investor for infrastructure industry and how rational for IT industry? What is the investor profiling when it comes to risk taking and for what duration? etc...

Consonance to future trends - There could be an energy crisis in the future so renewable energy could be a good bet. To understand which industries have a greater dependence on those inputs which would be in short supply in the future for eg. power. What other future trends do we forsee?

Some interesting links:

http://metalinks.metaculture.net/science/fractal/applications/default.asp

http://www.wallstreettape.com/tutorials/ta/

http://www.sigma-research.com/bookshelf/default.htm

http://www.carleton.ca/cifp/descriptions.htm

http://www.adb.org/Economics/jel.asp#C

http://www.dailyfutures.com/links2/

http://www.performancetrading.it/Documents/HpSwingtum/HpS_Books.htm

http://papers.ssrn.com/sol3/JELJOUR_Results.cfm?form_name=journalbrowse&journal_id=200688

http://www.psychonomics.com/research/a&s/bfinancelinks.html

http://people.few.eur.nl/djvandijk/nltsmef/nltsmef.htm

http://uoutperform.com/

http://www.investopedia.com/university/

http://en.wikipedia.org/wiki/List_of_finance_topics#Valuation

http://bigpicture.typepad.com/

http://seekingalpha.com/article/3033

http://www.fool.com/school/basics/basics06.htm

http://www.ciionline.org/default.aspx

http://www.quickmba.com/strategy/porter.shtml

http://www.indiastockmarket.com/ISM/

http://www.indiainbusiness.nic.in/