Monthly Archives: September 2013

The amusement park and our reasoning for everything

Dear friends,

what a time we are having in the markets. First the fall all the way from 5900 to 5100 something, the write off on markets by one and all and then the resurgence. The path to 5900 again. In this rollover coaster, I took cognizance of some basic factors:

 

1. You need a ticket to make money in markets. The ticket is being invested. The question of whether the ticket is good for single rides or upsides, or multiple rides is a matter of choice. Single rides are fast and fun but leave craving for more. We come out without experiencing many avenues in an amusement park. Multiple rides take time, can confuse in choice and at times may leave you giddy. You may enjoy some rides ala stocks more than others. Once the amusement is done with you are better prepared not only for the next round of rides but even start understanding the turns, twists etc. The same happens in markets. 

 

2. Any body who claims to know the markets in the short term (a term always undefined) is only as good as the flip of a coin. You can draw a head, head, head, head and head and justify you knew it all along. Which is theoretically all gas as a coin does not know unless rigged. So either a person admits he is a rigger or just proves that he was in plain hindsight lucky. It is human to take credit, specially when it is not due as that usually is the most unexpected hour, so be it. 

 

3. It is usual to bloat in the company of good food rather than scarcity. 

the same logic explains why we bloat of our successes rather than of our scarcities. Eventually we end up looking like anti gravity investors where the only journey is up. Savvy investors however realize their follies and remain committed to their horizon.

4. We behave like we are all a bunch of the next Buffett to be. Fully disciplined, understanding every bit of the co we own (sometimes assuming we know more than the people who run the businesses) and as if we will behave as we believe the classic investment books say. When markets go up, we buy as if we need the last sprint to win what is actually an impossible marathon where we don’t even know who else is running. When markets fall, we thank stars to say it enables us to buy more but defer decisions to buy hoping for the perfect weekend bazaar sale. As if we are Merchants of Venice who would get the last pound of flesh.

5. I keep getting emails, SMS, tweets, whatsapp requests on what are new ideas. It’s almost like hey we know you recommended 32 stocks, they have beaten the market. Well done. We know you like all of them but what the heck we want you to run again from the start with another team. My question is if I have not replaced an idea and if the going is good in terms of stock selection, Roce, dividends, industry spreads, why poke the mind to say no I force you as a punishment to dislike an idea and replace it. It’s as if I don’t like your clothes anymore so might as well recall the Emperor’s New Clothes that would end up making you naked.

I am fortunate and humbled by the fact that some 19800 people have since visited this blog but am equally aware that most don’t care about the art of investing. Many may not even read the lectures I posted. Investment is a tip for most with a bite out of a spread with the option tat if the bite does not gratify instantly anther bite of another food beckons. Medically that could leadnto indigestion.

So far I see no reasons for changes in the stock portfolio. I used the fall to 5100 odd to add to existing ideas. Even traded in non core with the likes of MCX, Muthoot finance and may be one odd more. My last post was a critical take on doomsday believers who said MCX will famish even at 280 odd when I saw that as an opportunity to own otherwise a fantastic sector with regulatory controls. The current upmove has been fulfilling.

But the real returns are still coming with peace of mind from the same stocks. If at all holding Wockhardt was a boon and adding it further from 450 to 360 was a matter of conviction. With this addition, the average cst in Wockhardt stands reduced to around 430 rs and the stock is back to 700 odd. I am not even factoring the sale done at 2000 rs odd which has been accounted as profit booked.

Amongst the newer ideas, just dial, bajaj corp, Tata sponge iron, Goodyear look interesting. One is benefitting from a very savvy niche business, the second from a product risk migration,the third from a large cash to mkt price mismatch and the forth from a rubber price softening and tractor sale segmentation.

Yet the best returns since the last update have come from the same banks, financials, consumer stories like Asian paints, mortgage cos, pharma stocks.

I am considering a few mispriced stocks lately where risk could be more but relative to returns is low. As all the cash had been deployed at the mkt fall, I will have to do some rebalancing soon. If you recall I was twitting and on whatsapp signaling that July and particularly august has seen one of my highest investments on a monthly basis in the market.

True, we have concerns. But so what. We are supposed to have patience, capital, diversification and know very well no one predicts the bottom ever. And who can forget that the sky is the limit.

On another note, as many would have noticed or so I believe I have reduced posting new ideas on twitter. I just feel fair to deal with investors not punters. Investors read blogs, reports. Punters lie fast food stock stands. There is nothing as a bang for the buck but interest on interest which does patience and time is far more interesting.

Happy investing and good luck.

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