Before buying a stock of a company, we try to know everything about it to be it chart, prices movement or history of the company, we want to know a lot about that company. But despite seeing so much, after a few years, the stock of that company starts falling and all our money sink. The biggest reason for this is the stock-picking strategy that we do not even pay attention to. So in this blog, I will tell you what is that thing if we pay attention, our money will never be lost. If you are thinking of investing money in the share market and you are a beginner, then you should definitely read this article.
Hello, friends, I am Manish Patel. Today I will tell you what is that one thing that must be checked before buying shares. Today I will discuss the stock-picking strategy that is available in all successful companies.
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Kodak's cameras which were once sold a lot, today it is bankrupt. Nokia's phone which was once in the hands of almost everyone, today it was bought by another company. There are so many companies like Kingfisher Airlines, Sahara Airlines, VideoCone Companies that we once thought that this cannot be finished But today all those big companies ended up from the whole market. In facts, about 25 to 30 years ago, which companies were part of Sensex, but today 75 to 80℅ of them have closed.
You take any well-known companies, today we will feel that these companies will never be closed but after a few years, those companies become bankrupt. Do not face you this type of mistake, for that, it is necessary that you identify the comparative strength of your company or recognized the moot. In this blog, we will know about :
1. what is a moot or Comparative Advantage?
2. how do we detect it? how do you find that your company has moot or not?
3. How do you identify? Whether you feel like a moot, is it a moot or not?
Almost, markets of all country are open. Any big company can come at any time and close small companies by investing a lot of money in the market. But as many smart companies are there, those have made a net around it so that it can protect itself from these big companies. It made a strong fort or shield around it which is difficult to distinguish. There is called moot or comparative advantage.
Today you must follow these steps that I am going to tell you. By doing this you will be saved from some mistakes. So now I am going to tell you how many
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types of moots are there, after telling this, all your concepts will be cleared. If any companies have all these moots, then those companies are safe for you. So let's know all those moots points-
1. Government Protection:
The first moot in this is that of government protection. That is, there is a company which has been saved by the government.
Suppose you have a grocery store, but it may be possible to open a big grocery shop in front of you. In this case, the government will not give you any protection. But if you are running a credit rating agency, then tomorrow anyone cannot open another credit rating agency, because the government allow only 5 or 6 credit rating agencies for the last several years. So the company whose stock you are buying, you should find that if that company has this advantage, then it is very good for you.
2. Low cost:
Now what is low-cost moot, you understand it by an example. Suppose you have a company to make cement and you know, the important raw material of cement is limestone. And if you have a limestone mine, then to manufacturing cement for you will become cheaper than your competitors.
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If you are able to make cheaper, then you can also sell cheaper and this will make customers more attracted to your goods. So, if you are thinking of taking up shares, then find out that there is such an advantage in that company so that the marketing price of its goods is less than its competitors. If such quality is in your company, then that company is safe for you.
3. Distribution Reach:
Understand this means, suppose that if you launch a new product in the market, then it may not be possible for you to reach that product to all the stores in a particular time. But this task is very easy for Patanjali company because their distribution reach is quite strong. By the time the products of your company will come to the market, then the products of another big company will take over the entire market. So, whichever company you are buying shares, if the distribution reach of that company is strong then it is profitable for you.
4. Brand:
Understand this with an example. Maggi which was previously only noodles. Then after he slowly launched pasta, catchup and many more products under the Maggi brand. This is because they get a lot of credibility of Nestle company from the Maggi brand. Similarly, earlier Patanjali had sold only health-related products, but today the company sells about 2500 products under the Patanjali brand.
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If you are buying the shares of a branded company, then you have a lot of benefits from it. The first advantage, If you have a strong brand, then the effort to build trust in your customers is greatly reduced. And the other advantage is that if that company brings any other products in the future, then it becomes a hit without any advertisement.
If a company launches any of its new products, then according to that they have to spend thousands of crores on advertising. But if the same products are launched from the brand name of Maggi, Detols, Lifeboy, then those products become a hit without any advertisement.
Therefore, the company whose stock you are going to buy must have a brand name, If that company launches a new product in the market tomorrow, then its marketing cost and chances of failure can be reduced. If it has such a brand, then the company is in a very advantageous position.
5. Network Effect:
In this type of moot, the network of that company is so strong that it is very difficult for any other company to compact it. If ever that company launches any of its new products in the market, then their products become a hit due to its strong network.
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Understand this with an example; Almost all of you use WhatsApp to chat with someone. What could be the reason for this? Is there no better chatting app than WhatsApp? There is a lot of chatting apps like Facebook, Google Plus, Hike massaging app. But still, almost everyone uses Whatsapp for chatting.
Its biggest reason is that all our friends or family do not use any other chatting app except WhatsApp. WhatsApp's network is so strong that it has become forcedness for people to use this app. People cannot use other chatting app even if they want to because all their friends use WhatsApp.
So any company in which the network effect is very strong, people are using it because everyone else is doing it. So this is one of the most advantageous moots. If your company has such a moot, then you can definitely earn a lot of money.
Friends, if you still have any doubt in this blog of the stock market, then you can follow me on Instagram. Where I will give an answer to all your questions from the details.
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