Price vs. Value

When I started Investing, I could not buy any share priced more than Rs. 500. I thought it was too expensive. I was investing only a few thousands every month so I would have gotten only a 7-8 shares on the contrary I could get 100s of shares of Rs. 10 priced stock.

Many years later I understood where I was doing wrong. I was simply considering share price as a proxy signal of the intrinsic value of the share that I was buying.

In the hindsight, a few of the investments still worked and a few did not.

But, here is what I would differently :

Delinking the "share price" from the "value of the share" in my head. We all have been trained to look at the price of things and judge how valuable it is.

Instead, start looking for other measures of value.

Some of them could be:

1. Price - to - Earning Ratio - P/E Ratio - to check something is overpriced or not
2. Sales Growth Rate in last 5 years
3. Profitability of the business
4. Capacity Expansion i.e. If the company is building new plants and increasing their manufacturing capacity.
5. Free Cash Flows
6. Growth in Investments from FIIs and DIIs

Will be writing more on these later.