How can an investor track his equity (stock) portfolio?

Investing in direct equities is about selecting fundamentally strong companies and giving them ample time to generate magnificent returns. Earlier investors generally used to follow the buy and hold strategy as most of the investors were unable to track the economic developments and changes in the company where they have invested due to lack of resources. So, if they have invested in good quality stocks then it would generate returns in the long run or vice versa.

However, the world has changed today, the internet surfing has made it easy to check out for recent developments in the economy as well as in the companies. Similarly, the companies approach to be interactive in the investment market and various authorised sources available on the internet has made it easy to track the equity investments.

To be a successful investor it is important to do portfolio analysis at regular intervals. But how exactly to track your stock portfolio? Is it only checking the stock price movement? Or is there much more to check? Let’s understand some of the points on how to track direct equity portfolio.

But, first let us understand what "Tracking Portfolio" means?

Generally, investors think tracking the portfolio means checking the stock price in the market and the profit numbers. Yes, this is a part of analysing the equity investments but there is much more to deal with. As a long-term investor one should check on fundamentals of the company like its financial performance, valuations and strength and weakness of the business. Today, any negative media post or scams can make or break a company. So the investor should keep himself constantly updated about the company, keep checking its credit ratings or keep an eye on any changes in the working of the company that can affect investor confidence.

Now, let’s discuss some of the points on how to track direct equity portfolio

Track the latest news about the company:

Many factors impact the performance of a company or the industry as a whole. These can be political, social, economic, or other macroeconomic events that can affect the performance of the company. Hence, it is important for the investors to stay updated about all the latest news and events at the macro and company level that can affect the company’s performance.

Study the quarterly performance of the company:

It is essential to go through the financial performance of the company. All companies release their quarterly performance. The listed companies publish their result on the stock exchange (like NSE, BSE). The results are also available on company’s website generally under the investor relations section. There can be profit or loss in a particular quarter but the investor should focus on the bigger picture and should look at the potential of the company. The investor should also consider the economic situation, if there is a downturn in the economy then it is likely it will also affect the company performance. But, if the company is consistently giving below-par results then the investor should find the reason for the low performance and then take a call on his investment.

Keep an eye on corporate announcements:

All companies are required to inform the stock exchange about any event that can influence the performance of the stock. The events could be launching a new manufacturing facility, mergers or acquisitions, change in the management, increase or decrease in promoters’ holdings, etc. The stock exchange updates all such announcements on its website. Investors need to be aware of all such corporate announcements to decide on whether to buy more stocks or sell the existing ones.

Check the trend of shareholding pattern (SHP):

Companies are required to update their shareholding pattern every quarter on the stock exchanges. It is essential to compare the shareholding pattern with the previous quarters. This will help to understand whether the promoters are increasing or decreasing their stake in the company. A decrease in promoter holding is an alarm and one needs to analyse the reason for the same.

Track the Stock Price:

Though this is not a recommended method of monitoring the stock portfolio, but due to lack of time to analyse the stocks regularly, one can keep a track of stock price movement on the stock exchanges. However, a sudden fall/ rise in stock price should not be the reason for buying/ selling the stock. To take a call on the investments one should then go through the fundamentals of the company.

Check the rating of the company:

Rating agencies such as CRISIL, ICRA, CARE, etc. review the financial condition of companies and generally rate them once a year. So, a company with poor credit rating implies that the management cannot manage its debts efficiently and that can adversely affect the future performance of the company.

Check the promoter’s pledge of shares:

Along with the shareholding pattern, companies also give details about the pledge of promoter’s shares every quarter. The investor must look at the pledge amount carefully as it is usually one of the first signs of financial trouble in the company. If the promoters cannot repay the loan then, the lenders will sell the shares in the market which will negatively impact the stock performance.

Attend the Annual General Meeting (AGM) or read the annual reports:

An investor can attend the annual general meeting which is organised by the company on yearly basis or can go through the annual reports.  Reading such a huge document can be a tedious task so the investors can read some of the important parts in the annual report like management discussion analysis (MDA), speech from the chairman or CEO, performance highlights, shareholding pattern, financial results and auditors report.

Check the valuations:

The investors should check the valuations of the company and see how the valuation of the company fares as compared to existing companies in the same industry. Relative valuation techniques like Price to earnings ratio, price to book ratio, return on equity and return on capital employed can be used to conclude whether the company is trading at a discounted price or is expensive as compared to its competitor in the market.