Friday, March 23, 2012

Different types of Stock

Blue Chips (also called Stalwarts)

These are stocks of high quality,financially strong companies which are usually the leaders in their industry.They are stable and matured companies. They pay good dividends regularly and

the market price of the shares does not fluctuate widely. Examples are stocks of Colgate,
Pond’s Hindustan Lever, TELCO, Mafatlal Industries etc.

Growth Stocks

 Growth stocks are companies whose earnings per share is grows faster than the economy
 and at a rate higher than that of an average firm in the same industry. Often, the earnings are ploughed

back with a view to use them for financing growth. They invest in research and
development and diversify with an aggressive marketing policy.
They are evidenced by high and
strong EPS. Examples are ITC, Dr. Reddy’s Bajaj Auto, Sathyam Computers
and Infosys Technologies ect.. The high growth stocks are often called


Income Stocks:

A company that pays a large dividend relative to the market

price is called an income stock. They are also called defensive stocks. Drug,
food and public utility industry shares are regarded as income stocks. Prices of
income stocks are not as volatile as growth stocks.

Cyclical Stocks:

Cyclical stocks are companies whose earnings fluctuate with

the business cycle. Cyclical stocks generally belong to infrastructure or capital
goods industries such as general engineering, auto, cement, paper, construction
etc. Their share prices also rise and fall in tandem with the trade cycles.

Discount Stocks:

Discount stocks are those that are quoted or valued below

their face values. These are the shares of sick units.

Under Valued Stock:

Under valued shares are those, which have all the

potential to become growth stocks, have very good fundamentals and good
future, but somehow the market is yet to price the shares correctly.

Turn Around Stocks:

Turn around stocks are those that are not really doing

well in the sense that the market price is well below the intrinsic value mainly
because the company is going through a bad patch but is on the way to recovery
with signs of turning around the corner in the neat future. Examples- EID –
Parry in 80’s, Tata Tea (Tata Finlay), SPIC, Mukand Iron and steel etc.
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