What is Intrinsic Value

What is Intrinsic Value

   July 16, 2018       prabhakardalvi

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Intrinsic Value

Intrinsic value is the perceived or calculated value of a company, including tangible and intangible factors, using fundamental analysis. Also called the true value, the intrinsic value may or may not be the same as the current market value. Additionally, intrinsic value is also used in options pricing to indicate the amount that an option is "in the money."

Intrinsic value can be calculated by value investors using fundamental analysis to look at both qualitative (business model, governance, and target market factors) and quantitative (ratios and financial statement analysis) aspects of a business. This calculated value is then compared to the market value to determine whether the business or asset is over- or undervalued.

The discounted cash flow (DCF) model is one commonly used valuation method used to determine a company's intrinsic value. The discounted cash flow model uses a company's free cash flow and weighted average cost of capital (WACC), which accounts for the time value of money, and then discounts all its future cash flow back to the present day.

[Intrinsic value is a core concept of value investors seeking to uncover hidden investment opportunities. In order to calculate intrinsic value, you need to have a strong understanding of fundamental analysis. Investopedia's Fundamental Analysis Course will show you how to calculate the true value of a stock and capitalize on undervalued opportunities. You'll learn how to read financial statements, use ratios to quickly determine value, as well as learn other techniques used by professionals in over five hours of on-demand videos, exercises, and interactive content.]

Intrinsic Value of Options

The intrinsic value of call options is the difference between the underlying stock's price and the strike price. Conversely, the intrinsic value of put options is the difference between the strike price and the underlying stock's price. In the case of both call and put options, if the calculated value is negative, the intrinsic value is given as zero. Intrinsic value and extrinsic value combine to make up the total value of an option's price. The extrinsic value, or time value, takes into account the external factors that affect an option's price, such as implied volatility and time value.

Intrinsic Value of Options Examples

Intrinsic value in options is the in-the-money portion of the option's premium. For example, if a call option's strike price is $15 and the underlying stock's market price is $25 a share, then the intrinsic value of the call option is the stock price less the strike price, or $25 - $15, so $10. Assume the option was purchased for $12, so the extrinsic value is the purchase price of the strike less the intrinsic value, or $12 - $10, so $2. An option is usually never worth less than what an option holder can receive if the option is exercised.

On the other hand, assume an investor purchases a put option with a strike price of $20 for $5, when the underlying stock was trading at $16 a share. Therefore, the intrinsic value of the put option is the strike price less stock price, or $20 - $16, so $4; and the extrinsic value is the purchase price of the strike less the intrinsic value, or $5 - $4, so $1.

Now, let's assume that an investor purchases a put option with a strike price of $15 for 50 cents when the underlying stock was trading at $16. The strike price less the stock price, or $15 - $16, is negative, therefore, the intrinsic value would be $0 because the option is out of the money. However, the option still has value, which only comes from the extrinsic value, the purchase price less the intrinsic value, or 50 cents - $0, which is 50 cents.

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Miracle happen in weekly market

Miracle happen in weekly market

   March 19, 2018       prabhakardalvi

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Note: Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com

We are connected to meet fed rate political issue effect for market index profit loss investor behavior for how to invest for long period or short period with some tricks In 2018.

today on date 19 March 2018 Indian market crash by  330 P.M with 280 points something calculate able. Nifty 50  down by 100 consumer durables by 318 points metal by 368 points oil and gas 254  and Indian vix increased by 3.9. Percentage.

Something went wrong for the Indian market in last few days from a scenario of PNB scam of Nirav Modi.

On date 19 March Metal Industries Mumbai with reason China steel China metal why?

Effects of calculation some sector is profitable for small retailer who invests for short term on some profit conditionally.

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Infosys divest onmobile system

Infosys divest onmobile system

   February 19, 2018       prabhakardalvi

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In market volatile, some companies having trouble facing financial problem. Present all Q earning, FDI, GST etc mixed in Storm of critical markets. some big fish help small one to survive in market.

but when they need extra they pull out all fund.

Major software company divest Onmobile in this critical and unstable market. 

when this blog type - 

Infosys  recover by  Rs. 6.70 (0.55%)  and Onmobile  Rs. 1.70 ( 3.51%) 

Onmobile nearby 52 week low, i suggest don't touch 

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Why we think the mutual fund is a better option for?

Why we think the mutual fund is a better option for?

   January 29, 2018       prabhakardalvi

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we discuss in this para on mutual fund but first, In the current market, we see bull running towards 12500 for nifty with fast speed. Some technical expert told media “ some correction happen before reach target depend upon some factors”, 

Before target, market up-down on results and oil heating with dollar to relate IT sector,

Some company measures maruti, hdfc, indian housing, hcl etc, on our radar,

We make updates day-to-day for our clients, on technical basis,

Media major player predict for market going fast but we say its fear-n-greed situation for trader and investor,

Some safe zone stocks for our Good traders

l Hcl tech

l Cipla

l Nalco

l Tcs

l Tata steel

l Wipro

l Coal india

With above refer para, some opportunity mutual funds try to invest when some correction happen in market, I have contract with major player for fund and use my money, but I don’t seen any progressive things,

Allow me to help you for giving suggestion for investing short-term and earn 30-40 % on investment,

I made trade with my knowledge, these things I want to spread,

Note: please send me query you have on prabhakar02@hotmail.com or call me 9664509906

Happy Trading

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Share Trading tips for Short term period dt 28 jan

Share Trading tips for Short term period dt 28 jan

   January 28, 2018       prabhakardalvi

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Share trading tips for Short term period dt 28 jan

Good morning trader,

Today I give you positive trend for :-

l Godrej prop 

Entry for 912

Sl for 776

Tgt  1180

l Kamat hotel

Entry 154

Sl 130

Tgt 198

l Indian bull

Entry 1405 - achieved on 29 jan

Sl 1348

Tgt 1546

Note : please send me query you have on prabhakar02@hotmail.com or call me 9664509906

Happy Trading

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Todays Stock Market Summary Chart of the Day Thursday February 2, 2017

Todays Stock Market Summary Chart of the Day Thursday February 2, 2017

   February 02, 2017       prabhakardalvi

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Note : Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com

The markets reacted strongly with a near 500-point gain for the Sensex yesterday. But how should smart investors react to this budget? The dust settles and we take a closer look at it, one conclusion is unavoidable: Despite all of the speculation, hype, and hoopla in the days leading up to the budget, there's nothing really earth-shattering about it. It's just business as usual on most counts.

Yet, the kind of attention this exercise gets here in India, especially in stock market circles, it is only to be expected that the markets react strongly.

But from personal experience, I can tell you this: For many on D Street, it has become an outright excuse for speculation. The surrounding hoopla makes it difficult for investors to see through it. And easy to believe that they must 'do' something in response to it.

It is at times like these that it is most important to rise above the noise. Make no mistake, it is an important exercise and does affect some businesses more than others. But these differences in most cases are marginal and incremental. And seldom of the 'make or break' variety.

All put together, the annual budget exercise is very much a part of the 'normal' business landscape of companies. The multitude of tweaks made in it either help or harm the cause of a given company ever so slightly. But then again, that's true for all the continuous developments, both global and domestic, throughout the rest of the year.

Its collective approach to stock picking, its devotion to large safety margins in the purchase prices, and its dynamic debt component (fixed deposits/bonds) renders most developments that the economy throws at the business world, government budgets included, trivial.

MCM strategy as a sort of 'Chinese Wall' between the rough and tumble of the business world and our subscribers' returns. It ensures that over the longer term, our returns remain not just protected, but well ahead of the general market's returns.

Chart of the Day  

The Union Budget for 2017-18 was presented by finance minister, Mr Arun Jaitley yesterday. 

The markets seem to give a thumbs up to the budget, the Sensex closed up 486 points for the day. Does the budget play a crucial role for a serious long term investor? What role if any do the valuations play in prospective returns. We looked at the price to earnings ratio of the Sensex on the budget day as a proxy for valuations and noted the following 3 year compounded annual return going forward.

Budget or Not - It is the Valuation That Counts  -       

We found that the market returns are agnostic to the budget in the long run. What mattered more was the valuations at that point in time. Cheap valuations are a big driver of future returns.

Be it the Union Budget, GST or a great monsoon, you always got to ask the all-important question: Everything said and done, am I paying too much for the stock in relation to its intrinsic value?

For even though the budget may be path breaking and the economy may have some great years ahead of it, when you pay too much, even a good stock can quickly turn into a bad investment.

 After opening the day on a flattish note, the Indian stock markets fell below the dotted line. At the time of writing the BSE-Sensex was trading lower by about 42 points (down 0.2%), while the NSE Nifty was trading lower by 15 points (down 0.2%). Sectoral indices are trading on a mixed note with stocks in the metal sector and auto sector witnessing maximum selling pressure.     

                    Today's Investing Mantra         

"Whether we're talking about socks or stocks, I like buying quality merchandise when it is marked down" - Warren Buffett

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Todays Stock Market Summury - Chart of the Day 24 Jan 2017

Todays Stock Market Summury - Chart of the Day 24 Jan 2017

   January 24, 2017       prabhakardalvi

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Note : Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com

So exporting our way to prosperity is out of the question. As per the latest trade data, exports are flat (i.e. up 0.75% YoY) in the first nine months of FY17. This, after a steep fall over the last two years. 

So what about domestic investments. Unfortunately, today's chart does not present a happy picture. For 'Make in India' to succeed, speedy clearances are a must. In fact, this was one of Modi's main election promises. 

It was widely believed, if stalled projects could be cleared, India's GDP growth would get a boost. We will never know because they are still stalled! 

As per CMIE data and reported in the Mint, the total number of stalled projects are still rising. Surprisingly, four out of the last five quarters with the highest stalling rate on record, have been during the Modi government's tenure. A fifth of stalled projects are held up because of lack of government clearances. 

A deeper look at the data shows that there are three primary culprits: lack of funds, lack of promoter interest, and lack of environmental clearances. 

Lack of environmental clearances is holding up 14.48% of all stalled projects. This is about two-thirds of all projects stalled due to lack of government clearances. 

A lack of funds is an easy problem to explain. Banks are loaded with bad loans and are not likely to provide more funds without all clearances in place. Equity financing is also very difficult because of a high risk aversion to such projects. There's not much the government can do about this. 

A lack of promoter interest is a fascinating subject. It could be a reflection of disillusionment with either the Indian economy's prospects or with the government... or both. 

Whatever the case may be, one thing is clear to us; corporates are in no mood to make big investment commitments. This was true even before demonetisation. Now the wait will get longer. 

Thus, we believe only patient investors who can wait for a revival in the investment cycle, will be the ones to benefit from any positive surprise on this front.

Now that US plans to pull out, the deal may not happen. Even if it does without US, it would lose much of its significance as US alone accounts for a giant share.

Anyway, that's good news for India. This is because TPP could pose a serious blow to India's trade ambitions, especially when it comes to exports.

India is among the top textile exporters. A lot of companies in the organized and unorganized sector get a lion's share of their revenues from supplying to member nations of TPP.

With Trump abandoning the TPP, Indian textile manufacturers will heave a huge sigh of relief. A textile stock Richa recommended in 2015 in Hidden Treasure, holds good upside potential for long-term investors. This niche player has created a name for itself and is the preferred supplier to top quality shirt manufacturers around the world. Its unparalleled quality controls enable it to stay well ahead of competition. However, the stock crossed its maximum buy price today. 

Here is the lesson that should be learned. We may never be able to predict geopolitical events like Trump's election or his policies. But by buying fundamentally strong stocks for the long-term when they are available cheap, you can put the odds of winning in the market, firmly in your favour.

 

After opening the day in the green, the Indian stock market indices moved further into positive territory. Auto and capital goods, stocks were leading the gains. 

At the time of writing, the BSE Sensex was trading higher by 222 points (up 0.82%) and the NSE Nifty was trading higher by 73 points (up 0.86%). The BSE Small Cap and BSE Mid Cap indices are trading higher by 0.6% and 0.7% respectively.

Is India ready for Make in India? 

The India story is India. Not the world. 

If we look at some basic data - say, the per capita consumption pattern across the world - India stands in the lowest cadre. 

Consider the following:

• Autos - India: 18 cars per 1,000; US: 800 cars per 1,000
• Footwear - India: 1.66 pair per annul; developed nations: 6-7 pairs p.a.
• Broadband - India: 1.4% of the total population; US: 28% of the total population
• Airports - India: 464; US: 15,079

The above data clearly shows India is an 'India story'. The opportunity to catch up to global counterparts across sectors is huge. 

However, it is important to note that make in India for India will only succeed if it is at competitive prices compared to the world. 

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Make Big Money in Cyclical Stocks in Intra, BTST, Client Mode, short Term

Make Big Money in Cyclical Stocks in Intra, BTST, Client Mode, short Term

   January 17, 2017       prabhakardalvi

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Cyclicals are the most misunderstood of all the types of stocks. It is here that the unwary stock picker is most easily parted from his money, and in stocks that he considers safe. - Peter Lynch 

Cyclical Stocks in Intra, BTST, Client Mode, short Term

But it's certainly prevalent in the stock market, isn't it? 

The excitement-to-fear rollercoaster ride is exactly what investors feel when they put their hard-earned money in cyclical stocks. 

As Peter Lynch rightly points out, they are the most misunderstood stocks in the market. Many of them are large caps, which are easy to confuse with bluechips. So unwary investors think cyclicals are fairly safe bluechip-like stocks. , But they aren't. 

Cyclicals, no matter how big or small, must be seen as a separate category. 

latest Hidden Treasure recommendation... Cyclicals are of two types.

The first type are companies directly related to the economy - i.e. any contraction or expansion in the economy affects them. Auto companies, capital goods, and banks fall under this category.

The second type of cyclical is a business where pricing, earnings, and cash flows are dependent on the demand-supply of their products or raw materials. Metals, sugar, and chemicals fall under this category.

So why should these stocks give investors the goosebumps? It is almost impossible to accurately predict the cycles for either of the two types.

So, while a low PE ratio would be attractive for most stocks, it is not always true for cyclicals. When a cyclical stock's PE ratio is very low, it's usually at the end of a favourable period. This is because of the disproportionate expansion in the earnings in the upturn of the cycle.

This is often a signal of cycle reversal. And once the cycle reverses, the stock falls quickly and the PE ratio adjusts higher.

This is why Peter Lynch said the worst time to buy a cyclical stock was when the past financial performance was at its best. In another words, when the trailing PE ratio of a cyclical stock is low, it usually means the stock is nearing the end of the cycle. 

This is where investors get on the wrong ride. They think they are buying a cheap stock. Then the cycle turns and the price falls. They're stuck on a train going down fast, and it could be years before the cycle turns up again. 

So how do some investors (including Peter Lynch) make big money on these stocks? 

There are two methods. Pick the one you are more comfortable with. 

The more common of the two is the timing method. Basically, you try to pick the bottom of the cycle and ride the stock all the way up to the top of the cycle. 

This is very difficult to do. Even if you are successful, you will have to endure a rollercoaster ride on the way up. That's because the markets are wary of any sign of a change in the cycle. 

Remember, everyone wants to sell at the top. So these stocks tend to react more to negative economic news than the rest of the market. This makes them extremely volatile even on the way up. 

The second method is less popular but more effective. Here's what you should do...

Pick an industry that's coming out of a major capex binge, so that more capacity won't likely be added at a fast pace.

Avoid industries where competition from new entrants is heating up.

Identify the best companies in the industry using fundamental analysis.

Find stocks that cater to a large set of clients to avoid client concentration risk.

Narrow down the ones with the healthiest balance sheets and cost-conscious managements.

Eliminate those with debt to equity higher than 1.

Don't pay more than 1.5 times book value.

Invest for the long term (3-5 years) to let the cycle play out.

This is not an exhaustive list. But it is more than enough to place you head and shoulders above most investors. 

Investing Mantra

"A prediction about the direction of the stock market tells you nothing about where stocks are headed, but a whole lot about the person doing the predicting." - Warren Buffett

Note : Any blog OR content suggestion you have , please mail me on prabhakara.dalvi@gmail.com

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Market reverse trading update. 10 march.. My view

Market reverse trading update. 10 march.. My view

   March 10, 2016       prabhakardalvi

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Today I catch some new thing for business purposes.  BSE finalize one formula for reverse trade for who want save from loss in derivatives transaction.  I clear that we stand against fraud trading with experimental techno,  it's take time but effective in future.

This session of NSE trading for Glenmark pharmacy with 62 qty.

Thanks

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Benchmarks continue firm trade, TECK, Infra lead FOR 11 March Indian Market

Benchmarks continue firm trade, TECK, Infra lead FOR 11 March Indian Market

   March 11, 2015       prabhakardalvi

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           Indian equity markets continued their firm trade in the late afternoon session on account of buying in frontline blue chip counters taking cues from European counterparts. Investors have started taking cautious approach ahead of the release of February CPI and January IIP data, which is scheduled to be released on Thursday. Traders were seen piling positions in TECK, Infra and Power stocks while selling was witnessed in Metal, Realty and Consumer Durables sector stocks. In scrip specific development, Jubilant Life Sciences was trading in green after a foreign brokerage firm retained a buy rating on the stock stating that the valuations of the stock are attractive, given expectations of improvement in EBITDA margins and free cash flows.  

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