Ever wondered how professional investors buy stocks?
They do not buy stocks in Impulse.Just like holding the stock needs patience for an investor, the same applies for buying too.They do not jump to buy the stock at a high price.Rather they wait for the stock price to correct.There may be excellent prospects for the company, but they do not buy the stock at the wrong price.
They keep an eye on the stock selected by putting them in the watchlist.When the stock price comes closer to the predetermined buying price, only then the investor decides to buy the stock.
Let me tell you the exact steps that you must follow while selecting stocks.
First find the intrinsic value.
Using your skills of fundamental analysis, you must find the intrinsic value of the stock first.
Now that we have the intrinsic value of the stock in hand, let’s decide on when to buy the stock.Following steps should be followed to create a watchlist using good finance and google drive.
Step 1.Open Google drive and create a Spread Sheet
Login to your good drive account first.If you are already logged in to your google account, then open google drive.The following screen will appear:
Then click on new.The following screen will appear:
Then from the drop down menu click on Google sheets to create a stock watchlist.
Step 2.Give a name to the spreadsheet
Give a name to the watch list in the upper right corner of the spreadsheet as shown below:
Step 3.Fill in the spreadsheet
Fill in the spreadsheet with the variables as shown below.There are specific functions for Google finance usage in the spreadsheet which are written in the first line.You can get the functions here.
We can see above the specific functions from google finance are kept above in green such as Price,pe,high52,low52 and marketcap.
Then we are asking google to display Price based on a stock code.In order to get it, we are using function =GOOGLEFINANCE($B3,$C1) .It tells google to display Price which is on C1 based on the stock code which is to be placed on B3.
Similarly, fill in the other values for P/E.The function that we will use is =GOOGLEFINANCE($B3,$D1).It tells google to fill in the P/E which is on D1 based on the stock code which is on B3.This is shown below:
Similarly, fill in functions for 52 week high,52 week low and market cap as:
- 52 Week High: =GOOGLEFINANCE($B3,$F1)
- 52 Week low: =GOOGLEFINANCE($B3,$H1)
- Market cap: =GOOGLEFINANCE($B3,$J1)/10^7
Note:The Market cap function is divided by 10^7.This is to get the result in Crores. These are shown below:
Step 4:Calculate the values
Calculate the following values and fill them manually:
- Earnings Yield
- %Below 52 week high
- %Above 52 week low
- Buy Price(After [email protected]%)
- %Above buy price
Now you may be wondering what is ‘Buy Price(After [email protected]%)’.It means what will be the buy price keeping 30% margin of safety.So how you will determine this value?
Just find the Intrinsic value of the stock and then deduct 30% value from it.
What is Earnings Yield?
It is the inverse of P/E most popularly used by Benjamin Graham.
Step 5: Learn to use it!
Now that you have created a professional watchlist does not mean that you will be using it methodically.
Let me tell you how to use it.
Create the watchlist in any type of market either bull or bear.Just be ready with you fundamental stocks with the Intrinsic value in hand.Punch in the BSE stock code and the company name and just keep your watch on the watchlist.
If the stock price corrects and comes closer to your predetermined buy price including the margin of safety,then you can buy the stock.
For your help, I have created another professional spreadsheet in which all the values are automated.You just need to punch in the Company name ,BSE stock code.
But then you must know the intrinsic value of the stock!
Let me know if you liked the spreadsheet by commenting below.