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Company Tags
Before investing in a stock, it is important to understand it qualitatively and have a solid understanding of what factors contribute to the financial data it yields. Financial data alone is almost never enough. It is important to know the underlying causes of the financial data churned out by the company.
To enable you to understand the qualitative factors that define your investment strategy for a stock, we are introducing a new feature that is now a new part of your Subscriber access -
The Company Tags.
What are Company Tags?
Company Tags seek to group companies having similar fundamental characteristics and potential investment strategies by investors. These tags are inspired by
Peter Lynch's investment style –
that companies can be categorized in this manner. The categories are:
The key characteristics that define each category - along with a few examples from the Indian context - are explained below:
Cyclical
The fortunes of cyclical companies tend to be linked with economic cycles. If the economy does well, the performance of these companies - and that of their stock prices - goes up. Mining and power sectors have cyclical companies that do well when the economy can afford them large contracts.
NMDC
Sesa Goa
are examples of cyclical companies. In one sense,cyclical companies
can be risky to invest in. Catching a cyclical company at the wrong part of the cycle means it could be years before you realise any returns. Timing is critical here and you need to look for signs that the downward cycle is reversing to invest in them.
Stalwart
Stalwarts are big companies that are capable of generating good profits. They typically tend to have a portfolio of strong brands - diversified for different markets. In case one brand fizzles out, a stalwart is still capable of generating solid results.
ITC
&Nestle
are typical stalwarts.Of course, if a stalwart gives you a windfall return not in keeping with its characteristic returns, it might be time to sell the stock to protect yourself from a correction in its price.
Fast Grower
Fast Grower stocks
are what every investor is hunting for. Which company is likely to grow multi-fold in the next few years? Growth stocks lie in emerging sectors as the entire sector is in a growth phase and has enough steam to pull the stocks along. Think IT and Pharma - sectors which still haven't matured yet. Growth stocks includeDiviS Labs
&KPIT Technologies.
When looking for Fast Growers, always look for debt-free balance sheets and steady profit growth. Also, remember not to overpay for growth.
Value
Value stocks
are another popular group of stocks among fundamental investors. Why? Because their market cap is lower than the value of their assets. This makes them bargain-buys for a savvy investor. For e.g.SAIL
andNeyveli Lignite
could qualify as Value stocks.While looking for value stocks, it is important to assess the total asset value correctly. All assets may not be tangible that could jeopardise your calculations.
Slow Grower
Slow Growers
tend to be companies that are both incapable of rapid expansion and unable to milk a growth sector. ThinkHUL
andL&T
.One way of identifying a Slow Grower is if the company pays
high dividends
. Since its profits are not reinvested for growth, they tend to return them to investors by paying them high dividends.
Question Mark
The
Question Mark
tag is assigned to companies that seem to have lost their way or are on the verge of losing their way. These companies may have been Fast Growers/Slow Growers at some point but have seen questionable value creation over the past few periods and face an uncertain future.Tata Steel
is an example of a 'Question Mark' company.Question Marks are typically
stocks to avoid
unless they show strong signs of finding a way out.
Turnaround
These are the most interesting and sought-after stocks. A turnaround company is one which has been battered on all fronts but is capable of making a dramatic comeback. Think of companies which are being spun off or are undergoing restructuring activities.
Wockhardt
is an example of a company which managed to turnaround.Of course, turnarounds are rare. More often than not, in looking for a turnaround, you might end up with a sinking ship. Always proceed with caution on this one!
The Company Tag for a company will be visible on its Decision-Maker. A sample Decision-Maker with a Company Tag is given below
The important thing to note here is that a company can have multiple tags over its lifetime. Hence these tags will be revised periodically to reflect which tag suits a company best at that particular point in time.
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About MoneyWorks4Me
MoneyWorks4Me has been helping investors make better investment decisions since 2008.
MoneyWorks4Me Investment Advisers is the trade/brand name of The Alchemists Ark Pvt. Ltd., a SEBI-registered non-individual Investment Adviser (Registration No. INA000013323).
We began in 2008 as an equity research company, helping investors identify high-quality Indian businesses and understand what they were worth through deep fundamental research and intrinsic-value-based investing.
Over time, we learnt that successful investing requires much more than identifying good stocks.
Investors also need to know how much to invest, how to allocate money across different assets, how to construct a strong portfolio, when to act and, equally importantly, when not to.
That understanding shaped our evolution from an equity research company into a broader investment company built around research, portfolio strategy, technology and human judgement.
One Investing Philosophy. Different Ways to Benefit From It.
Today, our capabilities extend across Indian direct equities, mutual funds, global equities, fixed income, gold and REITs and other suitable investment opportunities.
We do not see these as separate investment products. They are different building blocks of one portfolio.
The starting point is the investor: their goals, required returns, time horizon, ability to take risk and the role each asset needs to play.
Asset allocation determines where the money should go.Research and valuation guide what we own. Portfolio construction determines how much we own.Periodic review and rebalancing help keep the portfolio aligned with its purpose.
This investment philosophy is applied in different ways across MoneyWorks4Me.
Through Omega Freedom and Omega Legacy, we work closely with investors who want comprehensive investment advice and guidance in managing their portfolios.
Through Third Rock Wealth, we bring the same investment thinking and research depth to investors who prefer mutual funds as their route to wealth creation.
Research at the Core
We look at business quality, financial strength, competitive advantage, management, growth prospects and risks. But we always consider these alongside valuation.
A good company does not automatically make a good investment at every price.
Our Quality-at-a-Reasonable-Price approach seeks to bring quality and valuation together.
Start With the Portfolio
We do not begin by asking which stock, fund or asset looks attractive.
We begin by asking what the portfolio needs.
Indian equities may provide long-term growth. Global equities can broaden diversification. Fixed income can provide stability and liquidity. Gold has a different role to play.
Every investment should earn its place in the portfolio.
Focus on Process, Not Prediction
Markets cannot be predicted consistently. A sound investment process can be followed consistently.
We therefore focus on what can be controlled: asset allocation, quality, valuation, diversification, position sizing, risk management, review and taking action when required.
Let Compounding Do the Heavy Lifting
Long-term wealth is not created only by finding investments with spectacular returns.
It comes from putting money to work intelligently, earning satisfactory inflation-beating returns across the portfolio and staying invested long enough for compounding to make a meaningful difference.
Technology Has Always Been Part of MoneyWorks4Me
Technology has been integral to MoneyWorks4Me from the beginning, from our financial X-Rays and valuation tools to portfolio analytics and research systems.
Over the years, we have accumulated company research, financial data, valuation work, investment frameworks and insights.
The aim is to make it easier for investors and our teams to work with years of MoneyWorks4Me research, data and investment thinking.
It is not intended to replace human judgement.
Investing still involves context, uncertainty and decisions for which there is not always an obvious answer.
Investors Should Understand Why
Our advisory business operates in a fiduciary capacity, and the investor's interests come first.
We believe investors should understand the reasoning behind important investment decisions rather than simply follow recommendations.
That is the thinking behind our Do-It-With-Me approach.
It is designed to help investors remain in control of their money while benefiting from professional research, process and perspective.
Our Vision
Our vision is to build a trusted, research-powered investment company that helps investors make calm, informed and well-reasoned decisions throughout their investing journey.
Markets will change. Investment opportunities will change. Technology will change how investors access information and advice.
But the principles of successful investing are far more enduring:own quality assets at sensible prices, build portfolios intelligently, manage risk and give compounding enough time to work.
That is the investment discipline MoneyWorks4Me has been building since 2008 and continues to strengthen for the future.
MoneyWorks4Me method for rating and ranking mutual funds for SIP
MoneyWorks4Me rating and ranking of funds for SIP is available to subscribers only. Moneyworks4Me is not a rating and ranking agency, however it is required that users have a way of selecting funds and building a Portfolio. The method used by it are described below to enable users to understand the logic behind the rating and ranking Subscriber will find more details on this in the various content made available from time to time. In case you need more please write to besafe@moneyworks4Me.com
MoneyWorks4Me rates and ranks mutual funds based on the following data-driven system:
- Performance Consistency: This is measure based on whether the fund has beaten the benchmark index consistently. For this we compare the 3-year rolling returns of the fund with the benchmark for a minimum of 5 years and preferable 10 years. The period of rolling is one month and holding period is 3 years. Fund are color-coded Green on Performance when the fund beats the benchmark more than 90% of the time. It is Orange if it beats 80% to 90% of the time and Red if less than 80%. Funds with less than 5 year data are color-coded Grey.
- Quality of Portfolio Holding: Moneyworks4Me has color-coded stocks as Green, Orange and Red based on whether the company's performance has generated a ROCE above a threshold level (cost of capital) over 10 years (minimum 6 years) and generated positive Free Cash Flow. For Banks it checks whether ROE is greater than 15% and sales has grown over previous year. Stocks that perform consistently on these combined metrics are color-coded Green (min score 14 out of 20), Orange (between 8 and 14) and Red (less than 8 out of 20). Fund are color-coded Green provided the portfolio has 70% holding in Green stocks but not more than 20% in Red stocks. Funds with more than 20% Red stocks in the portfolio are color-coded Red. The rest are Orange funds
Funds ranking in screeners: Performance Consistency and Quality are two parameters used for ranking funds for SIP. The ranking as follows GG, GO, GR, OG, OO, OR, RG, RO and RR.
With the same color-coded funds, the one with the higher Average 3-year rolling returns (over 5 to 10 years), the number that appears in the Performance tag, ranks higher.
Here is the summary:
The third tag Upside Potential is not relevant for SIP. It is relevant for lumpsum investments in Mutual Funds.
Make an informed decision for Stocks
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Q Very Good
Q Somewhat Good
Q Not Good
V+UnderValued (UV)
V Somewhat UV
V Fair Value
V Somewhat OV
V+ OverValued (OV)
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SEBI Registered Investment Adviser
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Name of the IA registered
with SEBI: |
The Alchemists Ark Pvt. Ltd. |
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Trade/Brand
Name of IA: |
MoneyWorks4Me Investment Advisers |
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Brand Logo:
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SEBI Registration Number:
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INA000013323 Validity – May 16, 2019 – Perpetual |
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Registration:
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Non-Individual |
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BSE Enlistment No:
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1187 |
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Address:
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B-101, Signet Corner Building, Balewadi Phata, Baner, Pune, Maharashtra 411045 |
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Compliance Officer
Details: |
Name: Shrikant Jagtap Email: shrikant.jagtap@moneyworks4me.com |
Telephone: +919860359463 Address: Same as IA |
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Grievance Officer
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Principal Officer
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Name: Atharva Bhide Email: atharva.bhide@moneyworks4me.com |
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Standard Warning:
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Investment in securities market are subject to market risks. Read all the related documents carefully before investing. |
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Disclaimer:
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Registration granted by SEBI, enlistment with exchange and certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors. |
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