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StocksDB › StocksDB › AAA Model Portfolios › 19th ANNUAL WEALTH CREATION STUDY (2009-2014) By Motilal Oswal
Tagged: Motilal Oswal, Wealth Creation Study
Wealth Creation Study
Objective, Concept & Methodology
Objective
The foundation of Wealth Creation is to buy businesses at a price substantially lower than their “intrinsic value” or “expected value”. The lower the market value compared to the intrinsic value, the higher is the margin of safety. Every year for the past 19 years, we endeavor to cull out the characteristics of businesses, which create value for their shareholders.
As Phil Fisher says, “It seems logical that even before thinking of buying any common stock, the first step is to see how money has been most successfully made in the past.” Our Wealth Creation studies are attempts to study the past as a guide to the future, and gain insights into the various dynamics of stock market investing.
Concept & Methodology
Wealth Creation is the process by which a company enhances the market value of the capital entrusted to it by its shareholders. It is a basic measure of success for any commercial venture. For listed companies, we define Wealth Created as the difference in market capitalization over a period of last five years, after adjusting for equity dilution.
We rank the top 100 companies in descending order of absolute Wealth Created, subject to the company’s stock price at least outperforming the benchmark index (the BSE Sensex in our case). These top 100 Wealth Creators are also ranked according to speed (i.e. price CAGR during the
period under study).
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