Tuesday, May 22, 2018

A Leap of Faith

The "Indiana Jones" fans amoungst the readers will realise where the header comes from!The wiles of ancient civilizations and the pitfalls of modern day stock market is pretty similar.

Taking off from my previous post that there are no longer any safe havens for investors and risk needs to be undertaken to achieve higher returns I would stress on the fact that sometimes we make assumptions on the available information to evaluate investing options.

The macro situation looks quite horrendous with crude oil above $80,unsettled political situation in the Middle East and the first vestiges of a united opposition to India's Modi coming together to batter the so called growth stocks in the mid and small cap space over the last One month.The Nifty may have fallen about 1.5% but the midcaps have seen a steep 20% correction on average some falling 50% or so.

This is the time when convictions are tested as the lack of buying interest presents a huge test for illiquid counters even though those businesses' future may be just as bright as it was six months back.

This is the time to take a leap of faith(off course with thorough research) and go with ideas that one feels will continue to grow at 15%+ YoY ROE with a strong EV/EBITA and products that show a minimum 5-8% sales growth YoY.

I think we all know the names of such stocks but its difficult to build the conviction to buy and watch the prices fall and buy again.

In my 20+ years in the financial markets I think psychology is still hugely underrated.Many,let me quantify by saying most investors walk away when they are so close to finding the edge.The difference between holding on to duds and selling winners is a very fine line.

I have been a fan of Mahindra & Mahindra and after holding on for targets and seeing the prices turn just 20% from targets I sold for the funds I manage to find it going higher even with the markets roiled.

There is just no easy way or a formula and I guess that is what makes markets what they are and why there are millions of traders,analysts,experts et all.

Again sticking to your area of expertise and not going into a bruising ego battle against the market is best way not to lose motivation or be frightened into pulling out investments when they fall.

Saturday, May 12, 2018

There Are No Safe Havens

Ten years ago in a throwback to simpler times it was easy to plan investments.Twenty years before that it was even simpler - Land and Gold.Or Land or Gold.

Its a different story today and its evolving rapidly.There is nothing called a safe haven anymore.If you have land in the wrong place its not going to appreciate in value.Gold no longer holds that same place.

Bitcoins move up and down faster than elevators at the Burj Khalifa !

PPF, NSC, Kisan Vikas Patra, Post office Schemes are all passe` as interest rates are way down and post inflaton the returns would be negative in real terms.

With Bond Yields at 7.75% and interest rates in no - man's land the wherewithall to create wealth through investments has become a bit of a misnomer.I see many clients still clinging onto Bank Fixed Deposits like the drowning non - swimmer does to the last vestiges of floating plantation on the surface of the water.They just do not know that they will drown - plantation and all !!

But the amount of due - diligence needed to whet companies and businesses is beyond most.Why would Walmart buy a cross....if it wasn't the urge to compete with Amazon.Why would Tatasteel buy Corus and still regret it after 10 years....after all they have the best brains to analyse?

Having said this it is sometimes easier to do what you understand or invest where you think you know the basic Macros.

Equities in the listed space have most financial information available online and especially companies where the products are known and can be categorized.Stick to the simple listed space for those who start out and you most certainly will achieve those financial goals that you have set for yourself.

"All the things that make a trader profitable are difficult to do.Buy initial strength,short initial weakness,buy breakouts,sell breakdowns short and let a winner run with a trailing stoploss and most importantly - cut a loser short and accept when you are wrong" 
quote by Steve Burns

In investing there are 2 important factors

- Believe that there are no safe havens

- Accept when you are wrong and take appropriate measures to deal with the situation

Only growth will generate value in the future.Bet on growth.Buy growth.No matter which business.No what which sector.Everyone knows the ratios....!!!!