A few days ago I came across a wonderful book written on investment with keeping a mind of a trader. The winning theory in the stock market by Mahesh Kaushik tell you some of the beautiful methods to pick stocks.

Mahesh Kaushik considers buying a stock is just like he buy vegetables in a large store. It the place where we should buy only when we are getting a proper bargain and should sell when those things have appreciated high in value. I have mentioned below some of the brief points from his book.

  1. Diversify your portfolio– do not invest more than 5% of your portfolio in the single stock.
  2. Don’t incline to the same sector.
  3. Profit book– should happen and don’t get married to any stock. But try to do at the end of the complete year.
  4. Stock nature– Prefer dividend-paying companies over non-paying companies.
  5. Averaging out a stock– Never ever average out a stock just because their prices are falling but because you have a high probability of winning.
  6. Opportunist– Keep free cash for an upcoming opportunity.
  7. Base price concept– It is an average price of a stock over 3 years.
    Buy case- Base price < CMP(current market price). Buy when CMP is around 80% of the Base price. Sell when CMP cross over 120% of base price.
  8. RPS vs EPS– Look at EPS (earning per share) but don’t forget to look at RPS (revenue per share) as EPS could be negative for a fast growing company for years.
  9. Book value– When book value is 20% lower than CMP then that company could be a value buy.
  10. Block deals– Stay away from those stocks where block/ bulk deals happen regularly.
  11. Buying opportunity- The ratio of stock year high price to year low price should be less than 2.5. Mostly it is recommended around 2.
  12. Face value comparison– While comparing 2 companies  Min(CMP/FV(face value)) is considered better than the other.
  13. Maximizing profits– If your stock has been appreciated above 20% of base price then you can keep a trailing loss at 5% of the CMP.
  14. Promoter holding– You should select only those stocks where promoter holding is not less than 15%.

I hope this article will give you basic information about the book. If you are a beginner and want to master the art of winning in the stock market then I would definitely recommend you to read the book. It will add a lot to your knowledge.

Read: Some bitter truths about the stock market

Thanks for reading.

Share