Our Stock research philosophy

With it comes to doing stock research, quality, growth and right price for the business – all matter to us. We also believe that good businesses can spring up in any market cap segment. Therefore, we don’t have defined allocations to large-caps, mid-caps, and small-caps or defined allocations to sectors in our stock recommendations. Here’s how we build Prime Stocks.

• To start with, we consider the entire Nifty 500 basket – given that this covers almost the entire listed market cap, it throws up all available opportunities.
• To this, we apply basic filters to remove the very illiquid stocks so that you’re actually able to invest the amounts you wish to. Our liquidity filter applies regardless of the stock’s market cap.
• Then, we do a further round of elimination to weed out those with very shaky fundamentals – such as the severely loss-making, negative net worth, heavily indebted, and more.
• On this universe, out stock research methodology applies quantitative filters to rank this universe of stocks. This helps set a basic bar on the fundamental metrics that a company needs, to make it to our shortlist.
• Our model considers over 20 different metrics to measure quality and growth alone, besides a series of other metrics to understand stock risks, volatility, and valuations.
• The stock research methodology we have developed measures balance sheet strength, growth in revenue and profitability, as well as the quality of this growth. We combine both short-term and long-term averages to ensure that we’re not overtly influenced by the latest numbers. For example, while we look at revenue or earnings growth, we also look at how strong or stable this growth has been, whether or not it leads to cash flows, whether or not it is real growth. While we look at debt levels, we also look at ability to service interest and whether the debt has been put to good use. While we look at NPAs, we also see what the loan book is like and trends in NPAs.

Stock research deep dive

From the shortlist our model generates, we dig deeper to understand more about each company, its sector, its growth and profit drivers, valuations, and more. This exercise is an entirely qualitative analysis. This quantitative-qualitative blend gives us the ability to assess stocks and opportunities across sectors and market caps. It also removes any potential bias we may have towards particular sectors. It helps us offer a mix of styles. Our ‘buy’ list can and often will feature growth-style stocks, quality stocks, value or contrarian picks, or even dividend plays.

We additionally have a ‘Watchlist’, where we list stocks that we think hold promise, but are not ‘buys’ because we are watching developments. These could be related to valuations or the business. So, not all ‘Watchlist’ stocks will move to ‘Buys’! We also give you alerts on when a stock is overvalued or where the fundamental thesis fails or changes. We issue a ‘Sell’ call at such times.

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