10 Tips to Identify a Hot Stock


2) Return on Equity (RoE)

Return on Equity (RoE) indicates the returns that investors get on the shareholders' funds or equity. RoE is calculated by dividing the total profit by net worth (the amount by which assets exceed liabilities).

Return on equity is also known as Return on net worth or RoNW. RoE or RoNW is the most important parameters for shareholders from returns perspective. If the RoE or RoNW grows year on year, it would show that the returns on investments are increasing year on year.

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3) Promoter’s Shareholding

Promoters’ shareholding reflects what expectation the promoters have from the future performance of the company. When the promoters of the company purchase more number of the stocks year on year, it proves that they are confident about the future prospects of the company. But when the promoters start dumping out their stocks, then it gives a clear indicator that they are not confident about future performance of the company.

Hence, it is advisable for you to buy stocks of the company where the promoters are increasing their stake year over year.

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