Investing in the stock market can seem overwhelming, especially when there are over 5,000 companies listed on the NSE and BSE. The big question is: How do you find the best-performing stocks for maximum returns without spending hours on research? In this article, we’ll break it down into a simple, 2-minute hack that uses smart filters and clear strategies to identify winning stocks quickly. Let’s dive in!
WATCH | 2-Minute Hack to Choose Best Performing Stocks for Maximum Returns!
When to Enter a Stock?
Timing is everything in the stock market. Here are three key situations when you should consider entering a stock:
- When a Good Stock Has Fallen Significantly:
Stock prices can fall due to market volatility, but that doesn’t mean the company is weak. Look for fundamentally strong companies whose prices have dropped temporarily. - During Market Consolidation:
When the overall market is stable or consolidating, it’s a good time to evaluate stocks as there’s less volatility. - When the Company is Growing Exponentially:
Companies experiencing remarkable growth due to strong market demand or innovative products are often worth your attention.
The Loan Analogy: Understanding Due Diligence
Imagine a friend asking you for a loan. Would you hand over the money without knowing if they can repay you? Absolutely not! You’d check:
- Their financial situation.
- How reliable they are with money.
- Their plans for repayment.
Now, apply the same logic to investing in a stock. Before you put your hard-earned money into a company, ensure you understand its financial health, business potential, and growth prospects.
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The 2-Minute Stock Picking Hack
Here’s a simple 2-minute method using the Ticker Tape App or any similar platform to shortlist high-performing stocks:
- Set These Filters to High:
- Return on Capital Employed (ROCE): This shows how efficiently the company uses its capital. A higher ROCE indicates better performance.
- Free Cash Flow (FCF): Positive cash flow means the company generates more cash than it spends.
- Net Income: Consistent growth in net income is a strong indicator of profitability.
- Set Debt to Low:
High debt can be a red flag. Companies with low or manageable debt levels are generally safer investments.
By applying these filters, you’ll get a list of companies that are fundamentally strong and financially healthy.
Understand the Company Before Investing
Before investing, it’s essential to know:
- What does the company do?
- Which of its products are in demand?
- Why do you believe this company will succeed?
This ensures you’re not just investing blindly but are confident in the company’s growth potential.
When Should You Pick Stocks?
Macro Reasons for a Stock’s Fall
Sometimes, good stocks fall due to external factors that don’t affect the company’s fundamentals. These include:
- Government policy changes.
- Economic downturns or negative GDP growth.
- Weak industry outlook.
Micro Reasons for a Stock’s Fall
Company-specific issues can also cause temporary drops, such as:
- Failure to Adapt: For example, Nokia’s decline when it didn’t transition to Android like its competitors.
- Allegations of Scams: Companies like Adani saw significant price drops due to allegations but later bounced back after clarifications.
Pro Tip: Temporary falls due to these reasons can be excellent buying opportunities if the company is fundamentally strong.
Short-Term vs. Long-Term Investment
The duration of your investment determines how you analyze a stock.
Short-Term Investment
If your goal is quick returns, pay attention to:
- News related to the company.
- Expansion plans and management commentary.
- Upcoming product launches or competitive decisions.
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Long-Term Investment
For long-term investors, focus on:
- Government Policy Decisions: Example industries include electric vehicles (EV), green energy, solar energy, and semiconductor chips.
- Time-Tested Business Models: Companies with proven track records of growth and adaptation are reliable.
- Futuristic Business Models: Businesses aligned with future trends, such as renewable energy and technology, are likely to grow exponentially.
How to Stay Ahead in the Market?
To maximize your returns, remember these golden rules:
- Do Thorough Research: Know the company’s history, business model, and future plans.
- Observe Market Trends: Keep an eye on industries poised for growth.
- Diversify Your Portfolio: Never put all your money in one stock or sector. Spread your risk.
- Monitor Regularly: Stay updated on news, policies, and changes in the company’s performance.
Quick Recap: The 2-Minute Hack
- Use platforms like Ticker Tape to apply filters:
- ROCE, Free Cash Flow, and Net Income → Set High.
- Debt → Set Low.
- Analyze the reasons behind stock price drops:
- Macro (economy, policy) or Micro (company-specific).
- Decide your investment duration:
- Short-term → Follow news and events.
- Long-term → Focus on government policies and future trends.
This simple strategy will help you filter out weak companies and focus on the ones with the highest potential for maximum returns.
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