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Dr Vijay Malik in Economic Times: Beware! This market has stocks that will burn money; here’s how to spot them

Modified on February 25, 2019

Economic Times, leading business daily newspaper of India, has quoted us in its article “Beware! This market has stocks that will burn money; here’s how to spot them” dated Oct. 11, 2017. Following is the excerpt of the article containing our thoughts:

Out of all the parameters, management is the most important feature of any business, says Dr Vijay Malik, a value investor. He was talking about the art of stock picking in an interview with ETMarkets.com.

“I read past annual reports, credit rating reports, media articles and other publically available resources to ensure if the company management has taken any decision in the past, which has been against the interests of minority shareholders,” Malik said.

Any sign of actions where promoter/management has attempted to benefit at the cost of minority shareholders should be the first ‘no go’ sign for investors, irrespective of how good the financial and valuation parameters may look like.

Once satisfied with the financial and management criteria, Malik uses a margin of safety framework comprising a customised ratio called the self-sustainable growth rate (SSGR) and free cash flow (FCF) to determine strength in the business and the buying range for the stock.

FCF is the surplus amount a business generates after it paying of its operating expenses and capital expenditure. It shows how efficient a business is in generating cash and if it can pay investors some return after funding its operations and expansions.

“If a company meets all my parameters and is available within my buying range, then I start investing in it,” says Malik.

Read the complete article on the website of Ecomonic Times here

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