Junk Stocks

We belong to the age of the great Junk.

Junk food

Junk email

Junk thoughts

Junk music

Junk household articles

Junk activities

Junk News in TV

And of course, there are a lot of junk stocks out there – may be hundred and thousands out there. You need to be very careful when buying stocks with your hard earned money.

Don’t ever allow the markets to swindle you.

To my mind Junk Stocks exhibit the following characteristics :

1. Negative Net Worth
2. Declining or  no Operating Revenue
3. Declining Profit or mounting losses on a q-o-q basis / annual basis
4. High D/E  ratio which would drive such company closer to bankcruptcy
5. Questionable management or doubtful long term business potential.
6. Promotors holding is less than 10 per cent [ exceptions are always there and does this really matter when you know a stock is junk because of one or mix of the above 5 factors.]

I personally request all investors to be very careful whilst investing  your hard earned money in the markets as the Sensex is driving up prices of  stocks higher and higher – the sensex does not for that matter know whether a stock is GOOD, BAD OR UGLY but you are supposed to know and if you don’t then you are doomed.  Just as ignorance of law is no excuse, similarly ignorance of stocks is no excuse for embracing a stock that can literally choke you to death financially. If you are unable to differentiate a junk stock from a good stock then ask somebody who can guide you. Of course, you can always count on HBJ Caps to show you the way so that you don’t end up rusting your hands holding a junk stock.

 

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd