Long-Term Stock Selection Checklist
Many investors are confused when it comes to the stock market. they have trouble figuring out which stocks are good long-term buys and which ones aren’t. To invest for the long term, not only do you have to look at certain indicators, but you also have to remain focused on your long-term goals, be disciplined, and understand your overall investment objectives.
I am sharing my own checklist you can copy and can modify according to your way
- Debt to equity < 0.25 (can check in monycontrol and screener site)
- Promoter holding > 45% if not managed professionally (can check in www.investello.com and screener site)
- Zero pledge Promoter holding (can check in www.investello.com and market mojo site and trendlyne.com)
- Sales Growth 10% yearly and 12% three-yearly (can check in screener)
- CURRENT RATIO > 2 (screener and monycontrol)
- Positive Yearly results last 5 years (screener and monycontrol and investello)
- Positive Quarterly result last 5 Quarter not mandatory (screener and monycontrol and investello)
- Free Cash Flow GROWTH > 15 (investello)
- EPS GROWTH (5Y) > 10 % (investello)
- Market Cap > 500 (investello)
- ROE AND ROCE > 25 ( SCREENER)
- DIVIDEND YIELD > 0.5 in last 5 year (screener)
- Management has no fraud allegation (Google Search)
- Management not taking too much salary (Annual Report)
- the stock valuation must be lower than intrinsic value (attainix, screener)
- margin of saftey 10-30% on internsic value
- INTEREST COVERAGE RATIO > 10 (investello, screener)
- current p/e < 5 year average p/e (screener)
- stock dilution < 5% (investello)
- gross profit margin > 15 (screener, investello)
- net profit GROWTH (5Y) > 10 % (investello)
- inventory days must be the same as profitable fewer days is good (screener)
- the company must be involved only 1 or 2 Business (Annual Report)
- company dont have too many subsidiary (Annual Report)
- Debtor Days must be constant or decreasing order
Conclusion
Investing for the long term requires patience and discipline. You may spot suitable long-term investments when the company or the markets haven’t been performing so well. Using fundamental tools and economic indicators, you can find those hidden diamonds in the rough and avoid the potential value traps.
