How to choose stocks for long term investment: Warren Buffett

When investing in a stock for more than 10 years, simply looking at the numbers is insufficient. It is also important to consider the quality of the company. However, in terms of numbers, there are several factors to consider:

Points to consider while choosing stocks for long term investment in India

• Operating margin: Compare the operating margins of other companies in the industry. A company with a higher operating margin than its competitors has more pricing power and brand recall.
• Debt to equity ratio: High debt leads to higher interest payments from profits, and can result in bankruptcy if the company cannot pay its lenders.
• ROCE and ROE: Look at how well the company uses investments to generate additional earnings, and whether it is a good allocator of capital.
• Promoter Holding: Higher promoter holding indicates confidence in the company.
• PE ratio: This is a debatable parameter to judge a company, but it is better to combine earnings growth with the PE ratio, known as the PEG ratio.
• Sales growth: It is important to look at sales growth over the last 5-10 years, not just profit growth.
• The current ratio and quick ratio: These ratios reveal a company’s short-term financial health and its ability to pay its liabilities.
• Cashflows: This is the actual cash generated from operations and should be considered alongside profits.

Other factors to consider when investing in a stock for the long term include the quality of promoters, market opportunity, and brand recognition. It is important to research the historical track record of the promoters and the CEO/management of the company, as well as the size of the market opportunity and competition.

Some of the recommended books to read before starting investing are:

Before investing, it is important to read books on behavioral finance and other investment topics. Some recommended books include “Rich Dad Poor Dad,” Peter Lynch’s books, “Learn to Earn,” “One Up On Wall Street,” “Beating the Street,” “Stocks to Riches,” and “How to Avoid Loss and Earn Consistently in the Stock Market.”

• Rich Dad Poor Dad
• Peter Lynch Books
  • Learn to Earn
  • One Up On Wall Street: How to Use What You Already Know to Make Money in the Market
  • Beating the Street
• Stocks to Riches: Insights on Investor Behavioral
• How to Avoid Loss and Earn Consistently in the Stock Market: An Easy-To-Understand and Practical Guide for Every Investor

Some stocks matching the above criteria are:

Some of the stocks that match the above criteria include:

1. HDFC twins(HDFC Bank and HDFC)
2. Reliance Industries
3. ITC
4. Eicher Motors
5. Bajaj Holdings
6. Godrej Consumer Products
7. Godrej Agrovet
8. TCS
9. M&M
10. Asian Paints and Pidilite(Current valuations are a bit high)
11. Tata Chemicals
12. Tata Elxsi
13. Marico and Kaya
14. Bombay Burmah
15. Tata Metaliks
16. Ashok Leyland
17. Wonderla Holidays
18. Aditya Birla Fashion
19. Balkrishna Industries
20. Cera Sanitaryware

However, it is important to remember that buying a stock is only the beginning, and holding it for over 10 years can be challenging. It is important to be prepared for price fluctuations and to continue learning about investing.

This makes it a secure and also reliable alternative for bring back as

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