What business are you buying?
सेयर किन्नुअघि कम्पनी कसरी बुझ्ने
Most people pick a stock and then find reasons. Professionals look at the business first: what it sells, who pays for it, who could take it away, and who is running it.
The one-sentence test
Before you open a single report, try to finish this sentence: "This company makes money by ___, from ___, and it keeps making it because ___."
For our momo chain: "Sagarmatha Momo makes money by selling momos and drinks, from office workers and students in Pokhara and Kathmandu, and keeps making it because its outlets are in busy spots and people trust the taste." If you can't write that sentence for a company, you don't understand it yet - and you can't tell good news from bad news when it arrives.
- What does it sell? A product, a service, loans, insurance, electricity?
- Who pays? Many small customers (safer) or one big buyer (riskier - e.g. a hydro company selling all its power to NEA)?
- How does it grow? More customers, higher prices, new outlets, new plants?
- What could go wrong? A new competitor, a regulation, a bad monsoon, a cut in interest rates?
The moat: why profits don't get competed away
If our momo chain makes a lot of money, what stops ten new momo shops opening next door and stealing the customers? In investing this protection is called a moat - like the water around a castle. Businesses without one see their profits shrink as soon as they get good. Businesses with one can keep earning for decades.
On NEPSE, the most common moat is a licence: there are only a few dozen commercial banks and insurers, and getting a new licence is hard. That's why these sectors dominate the market. But a licence protects the sector, not each company in it - inside the sector, the better-run companies still win.
The sector decides the rules
NEPSE groups companies into sectors - commercial banks, development banks, finance, microfinance, life and non-life insurance, hydropower, manufacturing, hotels, investment and more. Companies in the same sector live by the same rules, so they tend to rise and fall together:
- Banks live on interest rates, loan demand and bad loans - and on Nepal Rastra Bank's policies.
- Hydropower lives on rainfall, how much electricity the plant actually generates, the power-purchase rate and its debt.
- Insurance lives on premium growth, claims and the returns on the money it invests.
- Microfinance lives on rural loan repayment and the interest-rate caps set by regulators.
So when you look at a company, always ask: is this news about the company, or about the whole sector? A bank whose profit fell 10% while every other bank's fell 25% did well, not badly. Lesson 9 goes sector by sector.
See it live on MacroLens NP Sectors → Every NEPSE sector side by side - earnings, valuations and how money is flowing between them.The people running your money
When you buy a share, a board and a management team you've never met decide what happens to your slice of the profit. Two things are worth checking every time:
1. Promoters and how much they own
Most NEPSE companies have promoter shares (owned by the founders and big early investors) and public shares (owned by people like you). Promoters owning a large stake is usually good - their money is on the line next to yours. Promoters selling large amounts, or pledging their shares for loans, deserves a question: why are the people who know the business best getting out?
2. What management does with the money
- Do they pay sensible dividends, or keep asking shareholders for more money through right shares?
- Do they grow the business, or chase unrelated "investments"?
- Do they deal with companies owned by their own relatives (related-party transactions)?
- Are there regulatory penalties, auditor warnings or delayed reports?
Many NEPSE investors start with "what is going up?" and work backwards to a story. Turn it around: start with businesses you understand, in sectors whose rules you know, run by people you'd trust with your money. Then - and only then - look at the numbers and the price. The next four lessons teach you to read those numbers.
See it live on MacroLens NP
Everything in this lesson, worked out on real NEPSE data for every listed company - inside the MacroLens NP desk.
Lesson summary
- Know what the company sells, who its customers are and how it makes money - in one sentence.
- A moat (a licence, a brand, a cost advantage, a network) protects profits from competitors.
- The sector matters on NEPSE: banks, hydropower and insurance behave very differently.
- Promoters and management run your money: check how much they own, and what they do with it.
Create a free account to keep reading
Lesson 1 is open to everyone. From here on, the course is still completely free - we just ask for an account so we can save where you stopped, keep your quiz scores and let you pick up on any device.
No card, no payment. 13 more lessons, 123 minutes in all.
Education only, not investment advice: nothing here tells you to buy or sell any share. Investing carries risk - you can lose money. Examples use made-up companies unless a real one is named.