Things to check before buying stock

I thought about having one article which gives information on things which are not related to fundamentals of stock but still can have relatively huge impact on stock price.

You can use this article as check-list kind of thing after you have done your research and identified stocks in which you are going to invest, or to perform further short-list for your liking stocks.

One way to research stock is provided in article: How to perform stock research using fundamental analysis. For this post, I am repeating relevant information from this article.

This is like never ending post and I will keep updating whenever I find anything new to add on.

Readers are most welcome to share their thoughts in comment section and add things which I have missed here.

Here are some bullet points:

1. Are you with mass or against mass? (i.e. are you doing the same thing what other people are doing or opposite) Whatever it is, what’s the reason for it and do you have conviction to stick to it?
2. Shareholding pattern is fairly important thing to look at. Mainly three things: promoter, institutions (DII and FII) and retail holdings. Broadly speaking, it’s good to have high promoter holdings and if retails holdings are high then stock will not perform well. Also, there are many instances when FII holding is high; stocks are more volatile in nature (or have high Beta); this statement is not always true.
3. Are MFs dumping stock? If yes then why?
4. Is it amongst last stocks on any benchmark (like NSE, BSE 200) in terms of market cap? i.e. say according to market cap if this stock is somewhere at no. 195 in BSE-200 list, then you are taking significant risk for buying this company. If this stock gets out of index then there will be significant selling by index funds.
5. Order book and Earning Estimates.
6. Industry outlook and Peer competition.
7. Is it hard to create business model or hard for new players to enter? If anyone can come in and implement similar things easily then that’s not worth investing in.
8. Secured loans and unsecured loans in balance sheet. If unsecured loans are high, then be extra careful as it will require to pay more interest (and other question comes as, is the company desperate for funds?)
9. Be cautious when you see high "other income" in profit/loss statement.
10. Technical analysis: Is it technically correct level to invest? (Personally, I check only market conditions and don't do technical analysis.)
11. Quality of Management: I don’t know how we can find this out (except looking at some parameters like ROE, ROCE, ROA etc. and Goggling name of directors). I would request readers to share their thoughts here. Currently, I have time consuming ways to check this and even then they are not reliable.
12. Anything bad in management record?