14 golden rules to evaluate a stock

Source: ICICI Direct Website - Money Manager - 15 July 2006
http://content.icicidirect.com/mailimages/moneymanger-15JUL-2006.pdf

1) Behind every stock there is a company and you should always find out what it is
doing. You should be able to explain what the company does and its products/
services to a layman.
2) You should have enough confidence in the stocks you hold and the reason why
you bought them rather than worrying about their daily price fluctuations.
3) Don’t get carried away by glossy annual reports. Most only contain information
that is already available in the market. One should try to figure out anomalies
and understand the finance of the company. Beware of window dressing.
4) Invest only in companies/businesses you understand.
5) Investing without research is gambling. No investor has succeeded by relying
on luck.
6) You should study facts, annual reports, and financials, value the company, future
outlook and then make a decision.
7) You should never buy a stock based on popularity or tips. Adopt relatively simple
methods for evaluating a stock.
8) One can never time the market. Ignore forecasts predicting the end of recession
or beginning of a bull run. If you are confident of a stock, buy it for the
long-term.
9) You should look for stocks that have not yet been discovered by the market or
companies that are “off the radar scope”.
10) If a company’s fundamentals are not strong, avoid the stock altogether and
instead wait for better opportunities.
11) A bad management will never give good return in good times, but good management
will fill the gaps when better times arrives.
12) Adopt different yardsticks for different companies.
13) Success comes by hard work, patience, persistence, flexibility, willingness to
do research and equal willingness to admit to mistakes and ability to ignore
general panic.
14) The traits given in point 13 would also improve your livelihood.