How To Monitor Stocks In Your Portfolio

Modified: 03-Jul-20

The current article focuses on the the best ways of monitoring stocks in the portfolio along with answers to important queries of investors about monitoring stocks.

An investor would appreciate that she must do a thorough due diligence about the business & industry analysis and management analysis of the company before she invests her money. She should refuse to invest in any company where she finds red flags during her analysis.

However, buying good stocks is not sufficient in itself for generating long-term wealth from stock markets. Monitoring stocks in the portfolio is equally important. Once an investment is made, it is advised that the investor should keep on periodically checking whether the company still fits into her standards of operational & managerial performance.

Buy & hold strategy with a blind faith is not advisable for investors in stock markets. Monitoring stocks is very important.

 

Why Monitoring Stocks is Essential

In most of the countries, laws contain easily exploitable loopholes, regulations are not strictly enforceable and corporate governance standards are not high. We keep on hearing about instances of corporate frauds like Enron (USA) and Satyam Computers (India) etc., frequently. Such instances serve as a grim reminder that managerial greed succeeding at the cost of shareholders is a real possibility in corporate world & stock markets.

A long-term investor should focus on monitoring fundamental parameters of business, operations & managerial performance of the companies in her portfolio. She should not consider continuous tracking of market prices of stocks and calculating gains at the end of every day as monitoring of her portfolio. In fact, many renowned investors have advised against continuous follow up of stock prices.

Warren Buffett believes that he would be very happy is stock market is completely shut for two years after he has bought shares of a company. Continuous tracking of stock prices has the potential of inducing emotional reactions in investors. It might lead the investor to deviate from her long-term investment strategy and start frequent trading or timing the market, which are some of the 5 most common mistakes done by stock market investors.

 

Simple Steps to Monitor Stocks in the Portfolio

An investor should follow a well laid out process to monitor each of the stocks in her portfolio. She should focus on tracking below mentioned parameters about her stocks:

  • Important news about the companies & their industries
  • Financial results of the companies
  • Shareholding changes including pledge of promoter’s shares
  • Corporate announcements about insider trading and other related matters
  • Annual report of the company
  • Credit rating of the company

These parameters change at different frequencies and therefore, an investor can have her stocks’ monitoring exercise clearly laid out as Ongoing Monitoring, Quarterly Monitoring and Annual Monitoring:

 

Ongoing Monitoring of Stocks

It includes tracking information about updates, which change without any predetermined time schedule. It contains following news and corporate announcements about the companies and their industries:

 

1. Following News about the Companies & Their Industries: 

An investor should follow the news related to the companies & their industries in her portfolio. This would keep her updated with developments like any policy & regulatory changes, new investments or exits by players, changes in raw material and finished products etc. about her companies.

Google Alerts is a very good tool for this purpose. It is particularly effective for tracking companies, which are relatively unpopular and not covered by mainstream media. Most of the small & mid cap companies will fall under this category.

I advise that for monitoring stocks, every investor should set Google alerts for all the companies in her portfolio. She can set the desired frequency updates as real time/once a day or week.

 

2. Corporate Announcements: 

Every company is required to inform the stock exchange about any important event, which can influence its share price. Such events include buying or selling of shares by its promoters, commissioning of new manufacturing capacity, any merger or acquisition proposals, appointment or resignation of any senior management personnel/director etc. Such announcements are available at the website of stock exchange.

An investor should read various corporate announcements made by the company as these would keep him aware about latest developments within and related to the company. Many of these announcements would help her make additional buying or selling decisions in shares of the company.

 

Quarterly Monitoring of Stocks

It consists of studying information released by companies to its shareholders and public every quarter. It includes financial results and shareholding patterns with pledge details of promoters’ stake.

 

1. Result Updates:

Most of the stock exchanges require listed companies to declare their financial performance at least once a quarter. Almost all companies follow March, June, September and December quarters for this purpose. Companies declare their quarterly and year-till-date financial results within 45 days from end of the quarter. Such results are available on the websites of companies as well as stock exchanges.

An investor should study all the quarterly results declared by her companies. However, she should not be overly concerned of subdued performance in one or two quarters. She should try to see the company performance in light of the general economic scenario. However, if a company is continuously declaring poor financial results, then investor should analyse whether she has missed something during her diligence before buying the stock. In case she finds out any vital information that changes her views about the company then she should consider exiting the stock.

 

2. Changes in Shareholding Pattern:

All the companies are required to declare their shareholding pattern & details of pledge of promoter’s shares once in a quarter. Most companies follow similar pattern of declaring it in March, June, September and December quarters. These details are updated on the websites of companies and stock exchanges.

The investor should study the shareholding pattern every quarter and compare it with the pattern of previous quarters. This analysis will tell her whether promoters or other major shareholders are increasing or decreasing their stake in the company. The investor should focus mainly on the changes in the promoter’s shareholding and can ignore the changes for other shareholders.

Promoters increasing stake in their company is a very healthy sign as they are the people with most intimate knowledge about the prospects of a company. Hence, it is said that if promoters are buying stocks of a company, then investors should buy as well.

On the contrary, an investor should be concerned if promoters are consistently reducing their stake in the company. She should analyse and try to find further information about it as it amounts to decreasing skin in the game of the largest interested party. It can be that the promoters might have sold their stake to raise funds for meeting any personal exigency. However, the investor should keep on investigating until she is convinced that promoters are still serious about the future of the company.

Other major investors like institutional investors (e.g. FIIs & DIIs) are temporary investors who come and go as per availability of funds with them. They do not have significant impact on business performance of the company until they increase their stake to strategic levels (>25% in India). Once they acquire the stake of >25%, they are able to influence the business decisions of the company. If a strategic investor is present in any company, then investor should follow change in its shareholding as well.

 

3. Pledge of Promoters’ Stake:

Companies declare the details of pledge of promoters’ shareholding every quarter along with shareholding pattern. Any amount of pledge should be seen with caution, as it is one of the first signs of stress in the financial health of the promoters & possibly the company also. If the promoter is not able to repay her loan, then lenders holding the pledge will sell the shares in the market. It would affect the share price very negatively and will reduce promoter’s shareholding in the company as well. Therefore, it is advised to stay away from companies where promoters have pledged their shares with financial institutions.The below article is highly recommended to understand and interpret the quarterly results filings done by the companies, for effective monitoring of stocks:

Read: Understanding & Interpreting Quarterly Results Filings of Companies

 

Annual Monitoring of Stocks

It includes studying information about the companies, which is updated once a year. It includes reading the annual report and credit rating reports for the companies.

 

1. Annual Report:

Annual report is the most important document published by every company at the end of every financial year. The company communicates its performance in the past year, strategy for future, expansion plans etc. to its shareholders through annual report. An investor can ignore reading the annual report of the companies in her portfolio, only at her own peril.

Reading annual report is the most important part of investment analysis. Therefore, I have written a separate article for understanding annual report of a company. You should read this article here:

Understanding the annual report of a company

 

2. Credit Rating:

Most of the companies, which have raised debt from markets or financial institutions, are required to get their debt facilities rated by any of the credit rating agencies accredited by regulators. Some of the prominent credit rating agencies active in India are CRISIL (part of S&P), ICRA (part of Moody’s), CARE and India Ratings (part of Fitch). These agencies review the financial position of the companies at least once a year to update the credit ratings issued by them. The agencies publish the ratings on their websites along with a summary document containing brief details about the comforting and constraining factors about the company. An investor can download the summary document from their websites.

Such ratings are a useful source of tracking financial health of a company for investors. Any improvement in credit rating is a positive sign and similarly any downgrade of credit rating is a negative sign, which should be analysed in detail by the investor.

Now a days, there are many financial portals, which accumulate information about the companies from various sources and present it to readers in one place. In India, financial media houses like MoneyControl, Economic Times etc. provide all the information about the companies like declaration of results, shareholding patterns, corporate announcements, credit rating information etc. on their websites. It is, therefore, advised that the investor should update her portfolio at any of these websites so that she can access most of the information required for monitoring stocks in her portfolio at one place.

Therefore, we can see that for monitoring stocks in her portfolio, an investor should do:

  1. Ongoing Monitoring: Track the news about the company & its industry by Google Alerts and read corporate announcements
  2. Quarterly Monitoring: Study the financial results and shareholding pattern with pledge details of promoters’ stake and
  3. Annual Monitoring: Study the annual reports and credit rating reports of the companies.

There are many additional methods, which investors use in monitoring stocks like attending annual general meetings (AGM), participate in analyst conference calls, visit company premises to see facilities, visit trade shows to see new product launches etc. An investor can put the amount of time & effort available to her for monitoring her portfolio. However, I believe that the above-mentioned process of monitoring stocks, if followed diligently, should suffice for a common investor.

It is pertinent to highlight again that a long-term investor should track the business, operational and managerial parameter for monitoring stocks in her portfolio. Tracking share price changes daily would do more harm than good to her.

Let us now get further clarifications about monitoring stocks by answering the important queries asked by investors:

 

How to safeguard stocks lying with Discount Brokers?

Hi Vijay,

Hope you are doing well.

How secure are the low-cost trading accounts and DMAT like Zerodha and CDSL?

As the wealth grows, our portfolio will grow more than ₹1 cr, which will represent a large part of our net worth. Therefore, we need to be sure that the shares are in safe custody.

Please let me know your thoughts and share your experience.

Thanks in advance,

Author’s Response:

Hi,

Thanks for writing to us!

We notice that most of the frauds related to brokers selling shares from investors’ accounts originate from two aspects:

1) Investors keep shares in the broker’s pool account and do not transfer them to their demat account with NSDL or CDSL.

  • As a result, the brokers are able to use these shares as a collateral to take loans from other financial institutions. When the broker is not able to repay its loans to the financial institution, then the lenders sell those shares and the investors who are the actual owners of these shares have to fight to receive their shares/money back from the broker.

2) Power of attorney:

  • There are two kinds of power of attorney, which can be entered between investors and brokers. Investors who look for margin funding/leverage from the broker and therefore, the power of attorney (POA), which these investors enter with brokers usually allows brokers to withdraw shares from investors CDSL/NSDL account without their permission. This is a big risk.
    • It is advised that investors should enter such POA with the broker, which allows the broker to withdraw shares from NSDL/CDSL account only on the sale of shares and in no other condition.

The above two steps should save investors from most of the issues. Rest, no one can predict what kind of new strategies; the fraudster may be thinking of to bypass all the safeguards.

Nevertheless, whenever any broker commits a fraud, then the regulators tighten the rules to block any loophole used by the fraudsters. Hopefully, in future, incidences of frauds by the brokers should go down.

All the best for your investing journey!

Regards,

Dr. Vijay Malik

 

Investors’ Queries on Monitoring Stocks in the Portfolio

How do we monitor the companies and stock prices?

Hi Dr,

I have some questions regarding the monitoring stocks. It will be great if you can help in this.

  1. How often do you track the stock?
  2. Do you track any other parameters as well?
  3. Do you track the price of the stock daily?
  4. Do you use any app to track the stocks?

I highly appreciate your work and I would like to know your opinion on these things.

Regards,

Author’s Response:

Hi,

Thanks for writing to us! We are happy that you have found our work useful!

1) How often do you track the stock?
2) Do you track any other parameters as well?

The monitoring of the stocks in the portfolio is a continuous exercise and as mentioned in the above article, we check additional parameters at quarterly and annual intervals.

3) Do you track the price of the stock daily?
4) Do you use any app to track the stocks?

Financial apps keep telling us the prices of our stocks daily. We have MoneyControl app installed on our phone. We use Valueresearch to track our portfolio of stocks.

Hope it answers your queries.

All the best for your investing journey!

Regards

Dr. Vijay Malik

 

Sources of conference call (concall) transcripts

Hello Dr. Stock,

I have noticed that in the various stock analysis, you use management past conference call scripts or management interview scripts as a tool of analysis. From which source do you get such information?

I tried searching on companies’ website – Investors’ relation segment, but couldn’t find any. Also, I tried doing a google search but I failed.

Please advise the source to find this information.

Author’s Response

Hi,

Thanks for writing to us!

There is no single source for concall transcripts. It would differ from company to company. You may check each of the following sources for the companies:

  1. Company website> investor relations
  2. BSE exchange filings
  3. Researchbytes. com

If the concall transcript is in public domain, then in all probability, you would get it from either of these three sources.

All the best for your investing journey!

Regards

Dr. Vijay Malik

 

Analyst / conference calls / institutional Meetings: who participates, what questions are asked

Dear Dr Vijay Malik,

One of my friends told me about you and introduced your site to me.  I have just started reading your articles on analysis and Q&A articles, and getting a different perspective on Stock Market and Shares.  I am not a big or full-time investor, very novice and till now I was not having any idea about value investing and also did not have any ownership feeling of any of the companies for which I bought stocks.  Now I feel how important it is to have the ownership feeling on any of the companies whose stocks I am going to buy.  Also got the importance of Fundamental Analysis that need to be done before buying stocks.

After reading your articles I understood that how I had been misled all these days by market emotions, media and other sources.

I am a very novice to the Stock Market, I have few basic questions on Stock Market.  It would be great if you could answer these queries or you can direct me to a right source where I could find the answers:

  1. What will be discussed (or agenda) in the Analyst/Institutional Investors Meeting? And normally who are the participants of this meeting?
  2. How often the Analyst/Institutional Investors meeting happens in a year
  3. Can everyone have access to the Minutes or the Summary of the outcome of Institutional Investors meeting? If so, where can we get it?
  4. Why some of the stocks are listed only on NSE or BSE.
  5. What is the rationale or why companies prefer being listed in only one of the Stock Exchanges, not on both?

I will continue to read your articles whenever I find time.  Also started reading the book: “Intelligent Investor”

Thanks in Advance.

Best regards,

Author’s Response:

Dear,

Thanks for writing to me! I am happy that you found the article useful. It’s great that you are working towards doing your own stock analysis and also have started reading “Intelligent Investor“. It is a great book and you will find it very helpful to develop the right attitude for a stock investor.

1. What will be discussed (or agenda) in the Analyst/Institutional Investors Meeting?  And normally who are the participants of this meeting?

Analyst/institutional meetings usually focus on the results & business performance updates about the companies as well as all the latest developments about the company and their impacts on company’s business. From the company, mainly CEO/Chairman, CFO, company secretary/investor relationship person etc. i.e. key senior management personnel, are usual participants. However, many times the senior management also brings other key people like marketing head etc. to the Analyst meeting. From participants’ side, usually, the investment analysts from stock brokerage firms, mutual funds, institutional investors are the participants. However, individual investors like us also attend these meetings especially, when they are held by way of telephonic conference calls.

2. How often the Analyst/Institutional Investors meeting happens in a year

These meetings usually happen each quarter or whenever any major development related to the company, which is expected to have a material impact on the company, takes place.

3. Can everyone have access to the Minutes or the Summary of the outcome of Institutional Investors meeting?  If so, where can we get it?

Analyst meetings/conference call minutes/transcripts are available on websites like researchbytes.com. However, the minutes of the closed-door institutional investors meetings, which happen one on one between the company and potential investors are not disclosed in the public domain.

4. Why some of the stocks are listed only on NSE or BSE.
5. What is the rationale or why companies prefer being listed in only one of the Stock Exchanges, not on both?

BSE has much more companies listed on it than NSE. As a result, many companies are listed exclusively on BSE and there might be only a few companies, which are listed only on NSE. Reasons can be many:

A company might have got listed on BSE when NSE was not established (NSE was established in 1992. And the might not have felt the need of getting an additional listing on NSE later on.

Costs associated with listing on additional exchange might be a factor

However, now a days, many companies, which have been listed on BSE for many years are getting listed on NSE as well. Also, most of the new listings/IPO are listed on both NSE and BSE simultaneously, therefore, the trend of being listed only on one exchange seems to be on a decline.

Hope it clarifies your queries!

All the best for your investing journey!

Regards,

Dr Vijay Malik

 

P.S.

 

Your Turn:

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