Prajna Capital - An Investment Guide

Sharp Correction Provides Good Value Buys For Investors With A Long Horizon. So how an investor can identify the good stocks to by for long term. In this article we discuss a method to do it. THE stock market is known to over react on the way up as well as down. So, it should come as no surprise that the market price-to-book value of many fundamentally-sound companies has slid to its lowest level in many years as a result of the recent turmoil. An analysis reveals that 181 companies (with strong fundamentals) are currently trading at a discount to BSE-500 index average price-to-book value (PBV) of around 4.75. And stock prices of 70 companies are trading at a PBV of less than 2. Such a sharp correction provides good value buys for investors with a long-term horizon. To give a fair picture, only those companies whose revenues and net profit grew at a CAGR of 15% or more in the past three years have been included in the study. Companies with 3-year average return on capital employed o...