Prajna Capital - An Investment Guide

THE bear phase may be far from over, but the quest for the next group of multi-bagger stocks have begun. Brokers say while savvy investors are still wary of buying aggressively, they have certainly started identifying stocks with long-term potential. One of the yardsticks they are looking at is the cash on the company’s balance sheet. Analysts say this strategy works in a bear market or an uncertain business environment, as net cash (adjusted to debt) is the only stable aspect on the balance sheet while valuations of assets and businesses vary as per market conditions. For instance, if a company stock is trading at Rs 500 and the entity has net cash at Rs 300 per share, then, as per this strategy, the share is valued at least Rs 300. Analysts note that significant cash balance in the books allows companies to pursue various activities such as a share buyback and acquisitions in uncertain market conditions like these. Many share buybacks allow investors to get a fair picture of ...