Advertisements not only gives you the knowledge about the various products of the company but can also give you considerable insight into the internal/financial position of the Company too.
There are 3 main parameters which can judge the state in which the company is:
1) Frquency of Advertisements
2) Financial Resoures / History
3) Market Scenario
Type 1 :
Frequency and Timing of Advertisements : High , Sudden Appearance
Financial ReSources/History :hard to trace
Eg.: Home Trade
Signals :
Typically , These type of companies are fly by night Companies.They come from nowhere and dominate the media altogether.Their main intention is to build market image to raise the money from the market and fly away.
Investment Risk : Very High
Type 2:
Frequency and Timing of Advertisements : High , Consistent
Financial ReSources/History :hard to trace
Eg.: Sahara Group
Signals :
These type of companies are heavily accumulated debt burdened Companies.It becomes a compulsion for these companies to be in media all the time coz if they don't they won't be able to create false image on the investor's mind for sustaining and to raise the money.
Investment Risk : Very High
Type 3:
Frequency and Timing of Advertisements : Consistent and then Sudden Increase
Financial ReSources/History : good
Eg.: HLL
Signals : There may be 2 situations :
1) Competitive Threat : Company when sense competition from new or existing entrants,it tries to thwart the competition by cornering as much market share as possible by resorting to high decible advertisements.
2) Reduced Margins : When Company's bottom line starts reducing and it's profits margins starts diminishing. The company , inorder to, push up or maintain the profits, go for advertisements.
Risk : Medium to Low
Type 4:
Frequency & Timing of Advertisements : Sudden Appearance and High Frequency
Financial Resources / history : good / sound position in other sector
Signals : These type of companies are typically conservative and resort advertisements when it is utmost necessary.
There again may be 2 situations :
1) Raising the Money : Company inorder to expand the operations or new products development, require finds.The Company , in order to make the fund raising or IPO successfull , go for advertising to enhance their market image . Eg. : DLF
2) Changing Track : When a Company wants to foray into another sector, The Company , inorder to capitalise it's existing market reputation to make a smooth transition in to another sector, take the help of media. Eg.: Vediocon
Risk : Low
So, By making a careful examination of not only the advertisements but also of the timing and frequency , you can learn a lot of unspoken story about the company.
There are 3 main parameters which can judge the state in which the company is:
1) Frquency of Advertisements
2) Financial Resoures / History
3) Market Scenario
Type 1 :
Frequency and Timing of Advertisements : High , Sudden Appearance
Financial ReSources/History :hard to trace
Eg.: Home Trade
Signals :
Typically , These type of companies are fly by night Companies.They come from nowhere and dominate the media altogether.Their main intention is to build market image to raise the money from the market and fly away.
Investment Risk : Very High
Type 2:
Frequency and Timing of Advertisements : High , Consistent
Financial ReSources/History :hard to trace
Eg.: Sahara Group
Signals :
These type of companies are heavily accumulated debt burdened Companies.It becomes a compulsion for these companies to be in media all the time coz if they don't they won't be able to create false image on the investor's mind for sustaining and to raise the money.
Investment Risk : Very High
Type 3:
Frequency and Timing of Advertisements : Consistent and then Sudden Increase
Financial ReSources/History : good
Eg.: HLL
Signals : There may be 2 situations :
1) Competitive Threat : Company when sense competition from new or existing entrants,it tries to thwart the competition by cornering as much market share as possible by resorting to high decible advertisements.
2) Reduced Margins : When Company's bottom line starts reducing and it's profits margins starts diminishing. The company , inorder to, push up or maintain the profits, go for advertisements.
Risk : Medium to Low
Type 4:
Frequency & Timing of Advertisements : Sudden Appearance and High Frequency
Financial Resources / history : good / sound position in other sector
Signals : These type of companies are typically conservative and resort advertisements when it is utmost necessary.
There again may be 2 situations :
1) Raising the Money : Company inorder to expand the operations or new products development, require finds.The Company , in order to make the fund raising or IPO successfull , go for advertising to enhance their market image . Eg. : DLF
2) Changing Track : When a Company wants to foray into another sector, The Company , inorder to capitalise it's existing market reputation to make a smooth transition in to another sector, take the help of media. Eg.: Vediocon
Risk : Low
So, By making a careful examination of not only the advertisements but also of the timing and frequency , you can learn a lot of unspoken story about the company.
