Picking companies to investment...

Today, I read an article in a leading new paper which is also published / backup by the author (Mr Shyam) in his blog. Its a good article and look forward for the rest of his series.

Based on his article my thought are as follows.

• Its never an easy task to identify a good company to invest. The audited Balance sheet / fund flow statement might not always give you the correct picture. Look at what had happened with Satyam / Enron. So in this case, how do you arrive at return-on-capital based on the figures given by the company. One arguement could be not all companies would be like Satyam, but then Satyam could still have been a financially strong company to invest, had Raju not disclosed the financial 'dressing' of the balance sheet.
• I believe generally a small investor compares FD Vs Stock market. He is unlikely to think of running a business on his own(icecream or restaurant) try to calculate the ROC. If you are running your own business, even 10% to 15% ROC could be a good investment, if you are deriving other benefits out of the business in the form of salary and other perks, benefits etc

I do agree with his point that blindly buying the stock for that matter making any investment based on recommendation on newpaper, magazine ,web or 'expert' advice might not be a wise decision.

Also, I believe, for any investment, foresight and timing is important and hence, if you are not sure and do not see the value for the investment at this point due to reason such as overpriced, people preference etc, it better to keep money in FD and wait until time is ripe.