Art Of Identifying Stocks For Long Term Investments

  • Jan 13, 2019 AEDT
  • Team Kalkine
Art Of Identifying Stocks For Long Term Investments

Investors participating in the stock market are often worried about market swings, profit concerns, stable long-term returns, and associated risks. However, investors must apply efficient stock picking techniques while searching for quality stocks with long term perspective.  The market participants must apply both fundamental as well as technical judgement before making medium to long term investment decision in the equity market.

Below are some of the aspects that every investor must focus to reap rich returns in the longer term:

1)    Management Quality: Market players need to understand that if promoters raise fresh capital, frequently it indicates that they are not competitive enough to generate enough cashflows to sustain or expand their business.

Investors must keep an eye on dividend payout by companies. A closer assessment is needed in situations wherein companies distributes lesser payout to shareowners despite earning strong revenues and when the higher dividend is paid out despite recording lower earnings. Director’s salary should be carefully examined in both absolute terms as well as the proportion of the company’s net earnings. The market players must check any abnormality between their salaries as compared to salaries paid to their counterparts in competitors’ companies.

2)    Business Risk: Every business model revolves around customers’ needs and fulfills them in the most efficient ways. However, businesses are often exposed to risks on their incapability to adjust to changed customer expectations. So, the investor must look for those companies who understood the customer’s pulse and change their business model accordingly so that they can extract more growth from the market.

3)    Financial Quality: Sometimes the companies declare sky-rocket revenue and profits, but their balance sheet reflects mounting debt. The reason for that is no control over working capital. Company’s receivables are increasing faster than revenues, gross margins of business are under pressure due to increase in the price of raw materials, but still, the company manages the EBITDA margins by cutting down on other related costs such as employee costs. These changes are accepted for a one or two quarter but for long term EBITDA and Gross margins must show similar movements if the company is not able to maintain that then investors must keep a right eye on that company.

4)    Valuations: Valuation is an essential factor which any investor shouldn’t miss. The investor must buy good stocks in bad markets by looking into its valuation. Any business which is growing in nature without compromising its financial and operational strength will hold an edge over competitors and investors must keep an eye on those businesses continuously.  Value investing is a rare art which every investor must follow to maximize their financial gains.

If investors follow these factors carefully and apply it on a regular basis, then they can pick the stock at a reasonable price for long-term. Market participants need to prudently analyze macro-economic factors, regulatory changes, company’s past and anticipated financial performance and recent significant announcements, in order to achieve long term financial independence in the equity market.


This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.


All pictures are copyright to their respective owner(s) does not claim ownership of any of the pictures displayed on this website unless stated otherwise. Some of the images used on this website are taken from the web and are believed to be in public domain. We have used reasonable efforts to accredit the source (public domain/CC0 status) to where it was found and indicated it below the image.


There is no investor left unperturbed with the ongoing trade conflicts between US-China and the devastating bushfire in Australia.

Are you wondering if the year 2020 might not have taken the right start? Dividend stocks could be the answer to that question.

As interest rates in Australia are already at record low levels, find out which dividend stocks are viewed as the most attractive investment opportunity in the current scenario in our report.

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK