Blue Chip stocks: 7 reasons to have in your portfolio

What are Blue Chip Stocks or Companies?

BlueChip Stocks are market stocks that are highly-priced. It has now emerged as an investment option over the past years. The companies that issue such type of stock are highly esteemed, with stable financial records and credibility. These companies provide attractive dividend pay-outs that gain the popularity of these stocks. There are few details that every investor should know before investing in the blue-chip.

Blue-chip stocks are issued by companies that have a large market capitalization and they are known as Blue chip companies. Companies that issue these types of shares have a great reputation and are well-established.

Features of Blue-Chip Stocks

The features of Blue-Chip Stocks are listed below:

·         Credit-worthiness: There is enough capital with Blue-chip companies that is sufficient for clearing all obligations and financial dues easily. This factor makes the creditworthiness of such companies high and the risk of default is low.

·         Risk Factor: Big companies are financially stable so the risk factor is comparatively low. The small amount of risk can further be reduced by diversifying your investment portfolio of blue-chip shares.

·         Growth Prospect: Blue-chip companies are large companies that have attained a level where the growth potential is maximum. Blue Chip shares grow slowly and steadily over time.

·         Investment Horizon: For investing in these shares the term of investment is over 7 years. Such a long period of investment makes it a good option for achieving long-term financial goals.

·         Taxation: The gains that can be obtained via blue-chip shares come under Section 80 C of the Income Tax Act that does the treatment of it as Income. The tax rate for short-term capital gains is 15%. Additionally, the long-term capital gains that exceed the amount of Rs. 1 lakh have a tax rate of 10%.

·         Assured Returns: Blue-chip stock’s returns are generated quarterly as dividends. Additionally, the fact that these are well-established companies serves the investment as a safe one for the investor. The returns are steady and guaranteed so the clients are kind of relieved and less afraid of any frauds.

Reasons to Have Them in Your Portfolio

Here are 7 Reasons why you should have Blue-chip stocks in your portfolio. Those are:

·         Timely Payments of Dividend: There is a trend of these companies that they consistently provide timely dividends. Additionally, this is because the income of these companies increases with capital appreciation. Also due to this reason Blue chips are termed as the best form of investment.

·         The Aspect of Strong Financials: The company is backed by strong financials so the debt-equity ratio is ideal. In addition to that, the financial ratios are great with an efficient operating cycle. Moreover, the low volatility, minimal risk, and mitigation of risk portfolio make this attractive for the investor.

·         Goodwill and Brand: Blue-chip companies have a good reputation and goodwill among households. Moreover, there is a competitive advantage over new companies or any incompetent competitors. The cost efficiency, distribution control, etc make these companies become market leaders. Some of the well-known blue-chip companies are McDonald’s, Reliance Petroleum, Infosys, Nestle, P&G, etc are on the Fortune 500 companies’ list.

·         Stable Earnings: You earn a stable dividend income via blue chips if the business is doing great. The trust of investors is earned by the company as they provide stable earnings to investors, shareholders, stakeholders, and employees.

·         Diversification: Diversification is a great move to reduce the risk of your portfolio. These companies minimize the risk of losses as they are backed with excellent operational efficiency. Blue-chip business diversification of demographics, generating channels, business lines, etc can be a blessing.

·         Liquidity and Ease of Access: As these stocks are popular the liquidity is high and they are easy to sell/buy. Moreover, you will appreciate this benefit of liquidity when you have already known the pains of selling an unpopular stock. It is a frustrating job to offload a less popular investment as the value starts to fall or when you want to let go of some of your equity. Blue-chip stocks are the most liquid investment as you can trade them in moments with the help of online platforms, various brokers, or fund managers.

·         Availability of Investment Options: There are a variety of ways in which investors can access these stocks. You can buy it directly or through ETFs or Investment funds. Additionally, you can choose from many investment options, that also includes UK-based companies, American or Korean Exchange. The benefits of ETF are that they have minimal transaction fees and can help to diversify your portfolio easily to cut costs.

If you still don’t have demat account, here how you can open upstox account.

How to identify the best fit Blue-chip stocks for your investment portfolio?

Many mutual funds and investors that are experienced prefer Blue chip stocks due to their impressive track record and dominance. Some of the factors to consider while choosing the best Blue-chip stocks are as follows-

·         Size: The value is indicated by the size of the company or market capitalization. Market capitalization is calculated by multiplying the number of shares with the current market price.

·     Company Revenue: When you identify the big companies you need to check the revenue or income. The companies you would want to invest in should have a larger market share.

·         ROE: Return on Equity helps to identify higher profitability companies against shareholders' equity.

·         ROA: Return on Assets helps to identify assets effectively in order to generate profit.

·       Valuation of the Company:A company’s valuation is not the same as market capitalization. It is based on factors like demand, supply, etc. Pay close attention to intrinsic value instead of the market price.

For more ratios visit Ticker

Conclusion

Blue-chip stocks have many benefits as compared to equity stocks. You should always do proper analysis before investing. There are many reasons to invest in them as they are trusted business models, have increasing dividends, steady cash flows, etc. They are considered a safe haven due to their strong performance, seasoned investors, and excellent track records. You should also consider the features of these stocks to know them better. Choose wisely and invest smartly.

Resource: https://www.apsense.com/article/blue-chip-stocks-7-reasons-to-have-in-your-portfolio.html

Factors To Consider While Choosing A Stock Broker

 “Risk hai toh Ishq hai,” the line which got us grooving through the year of 2020 from the famous 1992 Financial Scam Series based on Harshad Mehta. Our financial knowledge though restricted, was confident enough to take the risk and invest in this particular thing called “.” 

Stocks are controlled by the stock markets and a wise decision needs to be taken to minimise loss and maximise profit here. Since we do not have the expertise to directly trade in the market, we hire brokers who perform as intermediaries to perform this job charging commission. Now we know the basic terms involved in our journey towards investing in stocks, let us dive deep to understand this financial market and our decisions.

What is a Stock?

A stock is basically security which represents the ownership of a fraction of the company. The units of stocks are called shares. These shares are issued by companies to raise money from the market while people prefer it as an investment.

For e.g., if you purchase stocks of Google, you purchase a fractional portion of ownership in Google (you do not own the company since every company lies as a separate legal entity and also you buy a fractional piece of the corporation only).

Stock Markets

The Stock Market is the place where the activities like buying, selling, and issuance of shares by public companies take place. There are multiple stock trading venues in a country or a region that allows such transactions and operations.

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It brings all the stocks together in a market ensuring fairpricing practices and transparency in transactions. In India, we have the Bombay Stock Exchange and the National Stock Exchange while some leading stock exchange markets include the New York Stock Exchange and the Chicago Boards Options Exchange ( CBOE).

Stock Brokers

A stockbroker is basically a professional trader who buys and sells the shares on behalf of the clients. They might also be known as an investment advisor as they recommend the best investment decisions for you.

They work individually as well as with a brokerage firm and charge their commission or the compensation as decided by the employer.

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There are various heads under which the stockbrokers work such as:

1. Full service or Traditional brokers.

2. Discount brokers.

Most of the people are now using the online discount brokerage system like Zerodha, Upstox, Samco, etc. where they do not offer individualized investing advice but a platform to execute trades for a small-set of commission to be paid on every order. The traditional brokers, on the other hand, provides you with all the services of investment, planning, wealth management, and other sorts of advice charging a total cut commission on the volume of the trade. These include ICICI Direct, Kotak Securities, Sharekhan, Axis Direct, etc.

Why a Stock Broker?

The most common question which one might ask is if I have the financial knowledge, then is there a need to pay a certain commission to a broker. So the people who trade are the members of the exchange or belong to a member firm. They are licensed as brokers or broker-dealers by the Financial Regulatory Authority (FINRA). Though it is possible for you to buy and sell stocks directly but it is always preferred and simpler to do it through a stockbroker.

There are various benefits to hiring a full-service stockbroker like:

1. Investment management Expert Advice.

2. Marketing Insights.

3. Provide research.

4. Make informed choices.

While for Discount Brokers:

1. Easy accessibility.

2. Quick mode to transact.

We know the definitions and the marker now but what to see in selecting the right stock broker for you what are the pain points or the brownie points to give to anyone while selecting the one.

Factors to Consider While Choosing a Stock Broker

You want your return on investment to be the best and thus, you need to consider hiring a proper stockbroker. Here are the following points you must keep in mind:

Check for the Broker’s background: It is essential to do a history check of the performance of the brokers like the number of years he has been in the industry, the reviews of the clients worked with, performance output, and others. For e.g., if one buys an apple from a shopkeeper he ensures that his investment is worthy enough to have the proper product.

Look for the minimum balance to be kept: The stockbrokers required you to maintain a minimum balance with them. Compare the various brokers in the market and choose the ones which suit your pockets.

Check if the broker is regulated: Frauds are bound to happen in this market where people are oblivious to the profits and losses, so they might fool you in the name of higher margins but it is your responsibility to check the authenticity of the broker so that your crucial money is in the right hands.

Checking the research capabilities: The past performance on the equity reports, publishing market trends, and their insights on the financial markets are the ones to look out for in terms of choosing the best out of the brokers. Various websites as well as the stockbroking agencies have their own blogs and recommendations where they help you in your investing journey.

Margin Leverage: Margin exposure is a huge factor in selecting the best brokerage firm for stock trading as it allows you to trade multiple times over available funds in your account. Some brokers like Kotak Securities offer 50 times leverage for intraday trading so one must check out this facility to be availed.

The commission charged: Different brokers have their different sets of commission, it is advisable to check the margin of profit of the brokers so as to ensure a fair deal for yourself.

Customer Service: The vital role of a stockbroker is to provide good services to the end-users. One must always ensure if they are capable enough to provide good customer services as to responsive, alert, and all-time ready to deal with your matters. One can check with the other clients for their experience.

Add-on financial services: Add-on services are always considered to be an additional benefit on the part of the broker. It is recommended to inquire about the add-on services provided by a broker. You must compare the add-on services provided by different brokers and check how it will help you in achieving your financial goals.

Trading Platform: The online trading software offered by the broker nowadays is in the limelight. Your trading experience solely depends on the features, speed, user-friendliness, and reliability of the software.

Ask the question if the software has advanced charting features or market scanners? Does the broker offer a good mobile trading app to help you analyze and trade on-the-move? Read the reviews of the trading app of the stockbroker before making a decision. Check for the brokerage fees advising features and various other options available at the same commission rates and compare all the platforms and then come to a conclusion.

It is fair to say now that an investor should keep in mind the above factors to ensure the return on his investment and give in the specified time to research for the best stock broker for himself/herself. But where can you go for the right financial advice? Well, that’s a question you must answer yourself.

Disclosure: I wrote this article for information purposes only, and it expresses my own opinions. Therefore, the readers/investors are hereby advised to apply their discretion while selecting the stockbroker and making investing related decisions.

Originally published at https://seekingalpha.com on December 31, 2020.

How to Find the Biggest Stock Gainers and Losers?

Many day traders look for stocks with big price movements-the day’s gainers and losers. These are stocks with big percentage gains. These stocks are a great starting point to explore and find trading opportunities. This blog post will break down why you should find stock market gainers and losers, possible strategies.

Why Find Stock Market Gainers and Losers?

You can find stock market gainers and losers anytime of day-pre-market, intraday, or after hours. However, many day traders chose to focus on the pre-market and early intraday stock trading. Typically, these are shown as the stocks that have the biggest percentage increase in price during the time period selected. Many scanners show for the trading day.

These stocks with big percentage gains are a great way to create a daily watchlist so you can give them more attention. Once getting your list of the biggest gainers (and/or losers!), you’ll want to do further research, especially taking a good look at the volume. Analysis will help you determine whether you should buy, sell, or even short the stock, if that is part of your trading strategy.

These big gainers and losers can indicate a stock’s movement and the overall market or sector sentiment. As a day trader, the biggest gainers and losers could be a big opportunity to capture volatility and short-term price movement. As mentioned before, market movers are just one indicator for finding a stock to trade. When you find a stock you’re interested in, make sure to do more research, look at other indicators, and look at the context of the gainer or loser. Is the movement caused by an unknown reason or a news event?

What to Do Next

Once you find a big market mover and check for movement context, you’ll want to check the volume to make sure the stock has high liquidity so you can get in and out of a day trade quickly. After that, you may want to look at moving averages (such as a 30 day moving average) to confirm that the stock is a potential trade. You can also look at the chart to see if there is a chart pattern you use in your trading strategy.

The theory behind this strategy is that more people are looking at the biggest gainers and losers, meaning it’s more likely to be in higher demand, causing the price to go up even further.

Additionally, if the biggest gainers and losers are in a certain industry or sector, you can identify trends that may affect the group as a whole so you focus on (or avoid!) the group.

Originally published at https://pro.benzinga.com on May 28, 2020.

52-Week Highs and Lows — Hype or Helpful?

Besides an actual stock price quote the most available and commonly published piece of stock market information is what stocks have hit a new 52 week high or low today. Most financial newspapers will print the list, which is also available from just about any finance website. However, does this metric have any meaning or usefulness?

52-Week Highs and Lows

Some analysts propose that buying a stock hitting its 52 week high could be a reasonable strategy. Statistically speaking, there does seem to be some validity to that assertion. Conversely, avoiding a stock hitting its 52 week or yearly low is probably also be a good idea.

However, some caution and caveats are appropriate here. The 52 week time period is arbitrary and selected for convenience. The fact that investors pay so much attention to this artificial number is a great example of “anchoring.” Anchoring is what happens when decision makers (including investors) place a disproportionate amount of emphasis on a number or measure that has limited or no meaning.

The 52 week high or low is really just useful in trend identification. If a stock is at its 52 week high then its trend is positive. If a stock is near its 52 week low then its trend is negative. Momentum investors try to buy with the trend and the 52 week high is a convenient way to define its direction.

It is important to remember that the studies used to show that buying stocks at a 52 week high can be an effective predictor for above average growth in the future are based on large groups of stocks. Trying to apply a concept that works across large pools of stocks to just one or two stocks is not very reliable. Once again, diversification is needed to really see any benefits from buying up trending stocks.

The effects of anchoring can also be felt in the volatility of stocks at their 52 weeks highs. It is common for investors to feel that a stock at its 52 week high “can’t” reasonably go higher in the near term. This attitude may be the contributing factor for stocks at these highs to have greater percentage price changes or volatility than would be normally expected.

While 52 week high lists can be useful in finding stocks with some up trending momentum, diversification and the ability to sustain price volatility are needed to really take advantage of the opportunity. If you are interested in learning more or adding a few stocks to a paper trade portfolio, you can access a list of stocks hitting 52 week highs and lows here.

Originally published at https://www.learningmarkets.com

A Historical Opportunity In Small Cap Action

No pattern of risk is more widely understood and neglected regularly than “buy low, sell high.” Although we do not have time to buy at limited costs in different parts of life, putting resources into resources with low delayed returns seems wrong.

In any case, it is based on the argument that buying limited-cost inventories seems wrong and can regularly turn out to be correct. Amid a practically excellent market condition in which the coronavirus has closed the world’s economies, there are almost no financial experts who demonstrate a desire for values ​​in the short term.

Although lower ratings suggest better results from future speculation, our human nature advises us not to buy. This is why OSAM favors an orderly methodology that prevents our impulses and feelings from restricting a great dynamic.

While the media provides unlimited motivations to feel negative, the evidence shows attractive open doors for long-distance financial experts. As the saying goes, be greedy when others are scared. It is essential to remember, in a slowdown, that emergencies ‘ once in a blue moon’ additionally present noteworthy chances.

Opportunity In Small-Cap Action

From time to time, some vacancies can seem only 2 to 3 times in the profession of a financial expert, usually around a declining or declining market. Considering the showcase in progress, the test recommends that a memorable open door can be framed in small, cutting-edge actions, among the lowest return resources in March (Russell 2000 Index, — 21.73%) and Q1 (Russell 2000 Index, — 30.61%).

However, small, higher stocks are one of the best resources of return after bearish markets. As the information below appears, few stocks are generally the lowest performers as business sectors fall, however, fundamentally, they hit when markets recover. These sketches show the standard future returns for the 25 months with the least placement and the mobile quarters for small, essential organizations. The generally preferred position of small major stocks after the business sector declines is clear:

There is adequate information showing the superior performance of smaller and less expensive stocks in the long run. The diagram below shows the annualized return on the abundance of small major stocks within each decile of stocks estimated by their economy. On the far left, the least expensive stocks created an annual abundance return of 5.1% over the 54 years of the study, while the most precious commodities on the far-right failed to meet expectations by 11.0% per year.

Although there may be a notable open door in top small organizations in general, small high-value stocks are especially attractive.

There is a conventional model in history related to money, called the Kindleberger-Minsky model, which expresses that the ‘extortion cycle’ shortens the market cycle. Said unexpectedly, terrible tricks and organizations are usually not discovered until business sectors fall, and speculators end up becoming increasingly suspicious and traditionalist. The main models of Worldcom’s scandalous disaster after the Dot Com accident and Bernie Madoff’s Ponzi plot exploded in the Great Financial Crisis.

This is important for speculators, as it implies slowdowns while offering high chances to buy shares at lower costs, and yet expanded dangers such as organizations with false accounting and uncovered action plans are at work. The first quarter of 2020 offered a brief look at this wonder. Before the start of the crisis, on February 19, when markets were up, and estimates were high, organizations with the lowest decile of our quality measures beat the market. However, when markets fell, these low-quality organizations failed to live up to expectations, as speculators sought asylum in organizations with high Quality related to money and profit development.

There is a risk of buying small stocks aimlessly during market crises.

In OSAM’s Small Cap Value procedure, our Overlapping Earnings Quality, Financial Strength, and Earnings Growth ensure that, by putting resources into one of the best return resources, leaving the downturn, the technique is just buying organizations with significant financial resources and reliability, keeping away from low scores.

To show the appropriateness of this methodology, our deliberate use of Quality as an excluding factor has been necessary to stay away from the most pessimistic situations in the scenario, such as chapter 11. The scheme below shows that 92% of the settlements in the small upper space we’re recognized as betting tend to be categorized as probably the lowest decile of our quality issues — actions that we explicitly prevent in our procedure.

What is the result?

A portfolio with important focal points above the benchmark in terms of valuation, return on money for investors, and Quality. As of March 31, the Small Cap Value portfolio was 25% cheaper than the Russell 2000 Value record (estimated by Price / Profit), had a 1020% higher shareholder return ratio, and verifiable EPS development rate at one year than 7,000% higher than the benchmark. Regarding Quality, the portfolio was fundamentally less dependent on external financing (527% lower), had a 100% higher cash flow/debt ratio, and greater use of collections (27% lower).

In this season of market pressure, we accept that the Small Cap Value technique is ready for a solid execution, placing resources in one of the best classes that return from the bear market, maintaining organizations with inherently preferable attributes concerning the benchmark and contributing jointly to registering a high-income income spreads with different resources, suggesting higher future returns.

From March 2004 to March 31, 2020, the Small Cap Value SMA surpassed the Russell 2000 Value benchmark in 92% of 5-year turnaround periods (3.3% average overabundance return) and 95% of turnover intervals ten years (3.3)% Average return on abundance).

The material contained therein is proposed as a general criticism of the market. The conclusions communicated are exclusively from O’Shaughnessy Asset Management, LLC, and may vary from those of your agent or speculation company.

If there are not many problems, remember that previous presentations may not be characteristics of future results. Various types of ventures include fluctuating degrees of risk. There can be no claim that the planned execution of specific venture speculation, procedure or item (counting the venture speculations and systems suggested or attempted by O’Shaughnessy Asset Management, LLC ), or any substance not related to thinking, made direct or indirect reference in this piece, will be beneficial, equivalent to any comparison that has shown authentic levels of execution, is appropriate for your portfolio or individual circumstance or demonstrates fruitfulness.

Due to different elements, including changing economic situations and relevant laws, the substance may not, at this point, be intelligent about current feelings or positions. Besides, you must not accept that any conversation or data contained in this part is completed as a receipt or as a substitute for personalized endorsement from O’Shaughnessy Asset Management, LLC.

Any individual record execution data reflects profit reinvestment (as applicable) and is net of appropriate exchange rates. O’Shaughnessy Asset Management, LLC risks the board fee (whenever charged directly from the record) and some other costs related documents.

Registration data has been incorporated exclusively by O’Shaughnessy Asset Management, LLC has not been independently confirmed and does not reflect the effect of tasks on unqualified registrations. In preparing this report, O’Shaughnessy Asset Management, LLC, relied on the registry superintendent’s data. It will be ideal if you grant formal service records obtained by the registrar for purposes of disclosing assumptions and cost assessments.

If there are not many problems, contact O’Shaughnessy Asset Management, LLC, recorded as a hard copy, if there are any adjustments in your circumstances / monetary situation or speculation goals to research / evaluate/review our previous proposals, as well as administrations or with the possibility for you to force, include or change any limitations sensitive to our risk warning administrations. If there are not many problems Note: Unless you exhort, recorded as a hard copy, despite what is expected, we will accept that there are no limitations in our administrations, in addition to handling the registration according to the designated speculation objective.

Note:

Compare this announcement and explain the explanations obtained with the registrar. The registry superintendent does not verify the accuracy of the notice expense calculation. If you don’t mind, ask us for the chance not to have received monthly submissions from the registrar.

The lasting results of execution for lists of enterprises and classes were accommodated only for general correlation purposes and, in general, do not reflect the conclusion of exchanges or custody charges, the reasoning of speculation onboard expenses or the effect of evaluations, the occurrence of which would have the impact of reducing the recorded execution results.

It should not be accepted that your registration property is directly related to nearby listings. To the extent that a user has any doubts about the relevance of a specific issue mentioned above to their circumstances, they are invited to speak with the specialist advisor of their choice.

The results of speculative execution presented on the first pages are tested again and do not refer to the presentation of any record supervised by OSAM; however, they were obtained by methods for the retroactive use of each of the recently referenced models, some parts of which may have been planned with the advantage of knowing the past.

Conclusion:

Although OSAM may occasionally consider at least one of the components mentioned here when dealing with any record, it may not think about all or any of these factors. OSAM can (and will), from time to time, consider factors, notwithstanding those that excel in this, when dealing with any record. OSAM can rebalance a record as often as possible or less time than every year and on occasions that are not introduced in this way. OSAM can, from time to time, handle a record using a non-quantitative emotional endeavor, the plate systems related to the use of components.

Article Summary:

The speculative exposure does not reflect the reinvestment of profits and appropriations, premium, capital gains, and retention charges. The records supervised by OSAM depend on increases and recoveries of benefits under management, which can strongly or adversely influence the execution, relying mainly on the planning of such occasions comparable to the course of the market. Simulated earnings may depend on the market and financial conditions existing during the period. Future economic or market conditions may adversely influence profits.

Recommendation: For free stock analysis use the Ticker screener.

Written By: Ausaf Ahmed

Originally published at http://www.zordis.com on June 8, 2020.