When it comes to Investing in Stocks there are a lot of factors that need to be considered ROE stands for Return on Equity, ROCE stands for Return on Capital Employed, and many more statistics, and even though these Stats are good to judge the nature and possible returns on any given Stock I look out for another factor which makes me think whether to Invest in a Stock or not.
It's the Shareholding Pattern
Just so you know I am not talking about Promoter Holding and any Pledged Holdings as those are Stats almost everyone knows and checks for as those really do matter. But today I will be talking about something else on the Shareholding Pattern
I am talking about the Public Holdings of any Stock. The above Screenshot is from the Shareholding Pattern for BOROSIL RENEWABLES which has given us quite the rally for the 5 years but I have never invested a Single Rupee in this Stock the reason for that is pretty simple. The amount of Public Holdings is way too much for my taste as when the Waters get rough Public Traders are usually the ones getting out of the STock and Selling them quickly which definitely makes a difference.
So I usually prefer Stocks that have a low level of Public Holdings just enough for there to be a free float but not enough for them to Panic Sell and cause a huge dump on any Stock. So yeah this is something I check for in any Stock whenever I am doing some research and trust me when I say this I really look closely for such facts as they do matter.
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Thing is that companies with public shareholders tend to give serious dividends as the profits go to the government. There is still a play to be done on these ones. For example Petroleum Brasil I think gave a dividend of more than 80%. If you get paid for two years in a row, you recovered your investment.
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I also love to Invest in High Dividend Stocks but most of the times High Dividend Stocks tend to depreciate in value.
In the Indian Market there are a lot of High Dividend Yielding Stocks but only a handful give out incremental dividends as well as Price appreciation.
Interesting thought but I would also say, less float equals bigger price volatility
I mean if there are less floating shares then there is low chances of buying and selling of stocks.
For example in India a Promoter can hold maximum 75% stake in his/her company and if the Foreign Institutional Investors grab another 12% and Domestic Institutional Investors take another 10% then there will only be around 3-5% of free floating shares that can be traded on a daily basis which makes it hard for Retail Investors to get in on the Action.
Oh I see. Makes sense and I agree 😉
Yay! 🤗
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