Investing: Paras Adenwala

I got into stock trading a few years ago. Most of buying was based on tips from friends and colleagues. I have ended up with a portfolio laden with B-group stocks and have booked losses on their sale. Now, I have devised a strategy wherein I purchase stocks of the leader in a particular sector. Since these stocks are very expensive, my purchasing capacity is restricted. Is this a good strategy?
Whether a stock is expensive or not is determined by its valuation and not by its price. One can invest in potential winners after a thorough research. Equity research and portfolio management are full-time jobs and are done better by an expert. It is, therefore, recommended that you either entrust your portfolio to an expert, or have exposure to equities through a diversified equity mutual fund.

There has been a lot of hype around disinvestment of public sector units (PSUs). Many believe that these companies have untapped potential. There is a sense of security when one invests in these, as they are backed by the government. How should one evaluate a public sector company coming up with an initial public offering (IPO) vis-à-vis a private company. Is it wise to give PSU stocks a premium, as an investor cannot go wrong when it comes to promoters? Also, there are expectations that changes in policy will benefit them handsomely.
Any company, public or private, is a good investment bet if basic fundamentals are sound and pricing is right. It is true there is basic comfort in public sector companies due to government ownership, but this may not qualify these as good investment bets. For a sound investment bet, make sure the company has a healthy balance sheet. The business should yield consistent above average growth and valuations should be attractive. These parameters are applicable both for a company coming out with an IPO and an existing listed company.

A quick comparison between public and private sector companies will reveal the difference in valuations due to these basic parameters. Several public sector companies in these sectors quote at a discount to their private sector peers.

I wish to open an online trading account for my brother, who is a non-resident Indian (NRI). Will there be any procedural difference compared with the one followed for Indians.
Yes, there is a difference in the procedure for opening online trading accounts for NRIs. It is suggested that you check with a leading retail brokerage house for the procedure.

The writer is managing director & principal portfolio manager, Capital Portfolio Advisors. Send your queries to yourmoney@bsmail.in