Yeh Stock Valuation kya hai
Or
Why IPOs frustrate Investors
To understand read on …..
1) When Stocks rise we are happy
2) And the opposite happens when they fall
3) Let us understand this using a Simply Simple example
4) Like a human being can be made to work either by the stick or the carrot method
5) Or investors get motivated to take action because of greed or fear
6) There are two factors that take stock prices up
7) One is company performance (fundamentals)
8) The force of demand to buy (technicals)
9) This is like saying a human body inflates or becomes larger in size because of two reasons
10) Muscle Development & Fat Accumulation
11) Muscle development is like Fundamentals such as ROI, ROE, EBIDTA etc
12) Excess demand is like Fat Deposits that takes place in the body
13) Hence a body which is muscular is like buying a company at good valuation
14) But a body enlarged due to fat deposits is like buying a company with excess valuation
15) When we are in the midst of a Bull Market many stocks grow large because of fat deposits
16) This is when Valuations run very high in excess of their fundamentals due to the mad rush to buy during Bull Markets
17) Extremely high Valuations means largeness on account of FAT and not MUSCLES
18) Valuations are very important when we buy stocks because of this reason
19) When stock markets are in steroids and everything around looks expensive, one must not forget the unlisted space
20) This is a space where you will always find bargains and Great Valuations
21) Very strong & muscular bodies with little or no fat deposits
22) But most people are not aware about Unlisted Securities
23) In fact before an unlisted security gets listed in the stock market, it gives massive returns to the early investors
24) At IPO stage stocks are listed at a very high premium
25) This however massively rewards the investors who came in at the unlisted stage of the business
26) Investors who invest during IPO feel they will make a huge profit at listing
27) Honestly people who invest during IPO also need to have patience 5 to 7 years to experience quality returns
28) It makes no sense to critique Zomato, Nyka or PayTm
29) These companies will need time to deliver returns
30) And if they have fallen from their IPO prices then it offers a good investment opportunity
32) Because returns are not only generated by Equity and Debt but moreover by Market Volatility
I rest my case
