Researching a stock before buying it may seem like a time-consuming process, but any veteran investor would agree it is time well spent.
Looking into a company's operating history and industry environment may just as well be the difference between reaping significant gains or avoiding future losses.
Newbie investors are often tempted to give up when they are bombarded with a series of technical jargons when deciding to invest in the stock market.
Although they may seem quite tough to grasp at first, as we gradually go through them now you will realize it’s not as hard as it seems.
Here is how UAE residents cherry pick the best stocks
Samir Kapoor, a financial advisor based in Dubai, said he has been investing in stocks for the last 20 years. “I follow two main strategies when it comes to investing in stocks.” Kapoor is the Managing Director at Trillium Wealth Management, and he managing portfolios for himself and his clients
Kapoor said he follows the basic principle of “time” in the market rather than “timing.” “In other words, give the company stock some time to sow its potential returns. The more time you spend in the market the more time you give the stocks the greater potential for growth.”
He said rather than timing the purchase of stock, give the stock some time to grow. “So stay invested to reap its benefits.”
Spend time reading about the company
Kapoor also said when cherry picking stocks he spends time reading about the company. “So things like how the company has been in existence, which sector the company is specialised in - whether they are into technology, bio-technology. The geographical location of the company also matters.”
He added that he does his due research on the company’s senior management, what the company’s plans are for the future. “So I ask questions like what is the plan of the company CEO? Are they part of a growing industry. Then technical fundamentals of the company matter like net revenue of the company, the profile of the company etc."
I ask questions like: What is the plan of the company CEO? Are they part of a growing industry?
"I also follow the quarterly results of the company as that really affects the stock price of the company. Another important thing is the growth of the sector. For example bio-technology sector, oil and gas stocks are doing well now.”
Kapoor however is a firm believer of not putting all eggs in one basket. “Spread your investments. Even within the stock market spread your investments across companies to protect your downward risk.”
Look closely for finer details in a financial report
Indian entrepreuner in Dubai, Naresh Gurnani, also the chairman and managing director of Desilicious, has years of experience investing in stocks.
“I always check out a company’s financial reports and look for the finer details. Knowing the company’s plan for the future is important. I like to know what the company is launching, what is the amount of subscriptions the company getting. I see if the customer revenue is going up.”
Gurnani said it is not just the quantity a company is selling that determines its success. “I look at the subscription of their products as well. Those things matter for long term investments.”
He added that the airlines industry, cruise liners are picking up interest in stocks.
Don't have a long term perspective
Sri Lankan businessman Kosala Udumalagala, also the vice president at Continental Financial Services said: “When one is stock picking, I personally believe that they should not have a long-term perspective. We look at shorter-term investments of one to three years.
When one is stock picking, I personally believe that they should not have a long-term perspective.
"For the last two years, we have been focusing on blue-chip companies in the US. Also, technology companies including e-commerce are looking good.”
Udumalagala bases his decision on the company stock price and it’s historical data as to how it has moved. “The stock rises mainly on the future profit forecast. In the last couple of years the stock prices went up when companies merged. Another interesting investment scenario is when the market has a correction. Stock prices are low and it is a good time to buy.”
Indian Arjun Raman, banker based in Dubai said the way he goes about picking his stocks are all based on research reports.
“As a banker, we have a bankers group where we share public information of companies. So the company’s future plans are very important," Raman explained.
"Based on this, I decide on which stocks to pick and retain and which one to retain.”