Equity Research – a topic on which many people want me to write has no known boundaries! What all should one know for doing Equity research?
Well right from Anthropology to Zoology, there is no topic which is not part of E.R.
Do these 2 news items have anything to do with Equity research
http://www.business-standard.com/article/companies/westbridge-sequoia-eyeing-bumper-returns-from-vasan-114021901453_1.html
and
http://www.thehindubusinessline.com/opinion/columns/r-srinivasan/a-neverending-spree/article5706473.ece?homepage=true
Let us take the first one – the Vasan Optics story. If you do not know:
Who is the promoter, what marketing skills he has, etc. you really do not know the company. You also need to know the following:
Who was the Angel investor?
Who was the VC funder? – where they related.
Who was the Merchant Banker – how was he compensated? What is HIS name (not the name of the company)
Why did the 1st round funder come at that price, AND WHY at that price?
Was there a kick back given? by whom? how much?
How was the second round of funding done? – same questions, repeated, ad nauseam, repeat, repeat.
Is the promoter still in charge or has the funder hijacked the company?
Does the VC have the power to hold on for 7 years if need be
In most cases the story within the story is worth knowing. So to be a good analyst search this story inside out. Read, search, talk to opticians, doctors, opthmals,….and then you get an idea of the valuation. The newspaper is no longer the 4th pillar – it is just a collection of ads. Some paid ads – as you understand. Others paid for – as you do not understand. Sometimes you need to question the time of the ad, the motive, – that too!!
NOW LET US COME TO THE SECOND NEWS ITEM:
Does it mean the government will NEVER be able to control inflation?
Will the next pay commission also just increase salary WITHOUT reducing the no. of people – like past govts?
…these are of course the Macro questions..
getting the drift…?
Source:Subramoney.com