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Thursday, December 20, 2012

               Which Stocks should a newbie buy when entering stock market...?

A friend of mine has suddenly started having a lot of interest in stock market. So she asks me can I help her with some basics on how to decide on which stocks to buy. I gave her some information about Price to earnings ratio, EPS, market cap, book value etc. But after a few weeks she was still at  a loss.
                                                So, I told her to but the stocks of those  companies of whose products and services she uses. As I have known her for so many years, I know which all products she loves and all.
So  the stock/companies/products I mentioned to her were:

  1. Domino's / Jubliant Foodworks: Now she is a skinny girl, who is grossly under weight, but she is a huge fan of Domino's Cheese Burst pizza's and Garlic bread. Her roommates share her passion for these as well.  Now, anybody who has followed the returns given by Jubliant Foodworks would definately agree with me. And with the addition of Dunkin Donuts, it is still a stock to buy.
  2. FastTrack/ Titan Industries: She loves fast-track accessories, whether it be bags, watches, sunglasses. Add to that the love of her towards rings and other jeweleries and the brand Tata, Titan becomes a must buy for her. Business sense dictates this as well. No matter people keep on saying that the growth of Titan will slow  down or so, I don't believe them. A company which caters to the  lifestyle of the today's generation and sales of less than 9000 Cr, is gonna keep on increasing.
  3. ICICI Bank: She has her salary account with ICICI Bank, and will also open her trading account with them (if she ever does that). And she is a happy customer. And I don't think that I even need to give reasons for buying this company.
  4. Wipro Consumer Care and Lighting: Before she only used to use Dove, at that time she should have bought Hindustan Unilever. But now she doesn't like Dove at all and  loves Santoor. And I would definitely recommend her to  buy the IPO of Wipro Consumer Care and Lighting, whenever it comes. WCCL is growing at a very fast pace, both organically and  inorganically. 
Now as she got the hang of what I was saying, she suggested Kingfisher is another brand but it is failing. Then I said not everybody uses Kingfisher. We young people like bang for our buck, hence we prefer Indigo or GoAir. Then she said everybody around her drinks Kingfisher beer and then I said, in that case buy United Breweries.

Then I quoted her few more examples from my life and other around her. We discussed companies like Bajaj Corp, of whose Bajaj Almond Drops, I have been using religiously for last 12 years, from school time.
ITC Ltd.,  she is pissed with her teammates who take a cigarette break after every 30 mins., which better  company can you ask for which has such loyal customers.

Buying a right company is so easy, one needs to just look into their life and in people around us. Go and buy Sayaji Hotels, if you are a fan of Barbeque Nation, or Page Industries, if you love your Jockey, or Speciality Restaurants if you love eating out at Mainland China.

These companies have given excellent returns in the past and will keep on doing so, just because you love their products and their are many who feels the same way about them.