Monthly Archives: December 2017

the last sunset of 2017 will give way to the first sunrise of 2018

dearest friends,

a very happy new year eve to you. with some nostalgia, I saw the sun setting for the last time in 2017 a few minutes back. Usually I get emotional when I see somebody knowing I may not see them soon enough.

 

The sunset had the same effect. While I know the sun will rise tomorrow morning with a new sunshine and much new energy, excitement and resolutions and lots of greetings amongst family and friends, the fact that we won’t see 2017 again had some impact.

as an optimist, I don’t compare years and leave much positive to look forward to, yet, 2017 has been a remarkable year in many respect. Profession apart, 2017 for me was a year of several discoveries.

some in stocks, some in people, some in friends made within people and a completely different approach to many things. It’s truly been a new year.

2017 for investors was one of those rare years where you were rewarded by highest conviction even against results and traditional valuation norms.

I personally feel, at the risk of perhaps disappointing some, including the thermal bull within me, 2018 is likely to be a tough to moderate year for stock picking.

 

I don’t think the rally will be as broad based as it was in 2017 across most mid and small caps. Frankly I will be happy with a 12 percent or 1 percent pa rise in markets and hence the challenge of outperformance will be more than in the past based on hard work, out of box thinking ¬†and now less on momentum.

i see blogs struggling with new ideas, Broking research reports focusing on few years ahead as a basis to justify buy decisions and a general catch up of assumed earnings in current valuations.

Let me clarify before I am assumed to be sounding negative. I am almost fully invested and am not intending to sell and sit out. However it concerns me when the toss of a coin and a guess on an outcome that turns right is taken to be skill and not luck. I think the market is now trying to catch a lot of left overs, some of which may be well deserved but not all. Just because a co in a sector has done outstandingly well, to assume that every co in the sector is headed to good times is like assuming just because one student in a class is doing well all others are assumed to be doing well too.

With such a liquidity gush, some of which will continue, I am glad I am not running a large fund that not only needs to invest but now live up to benchmarking and justify positive returns to keep new money investors not turning against. It’s easier to manage when things are languishing (as they were last few years) or general market caps of some companies were way too ripe for large moves with some catalyst be it in orders or some value unlocking or debt structuring or capex expenses coming to an end.

Today the market claims to have too many positive views. The views have some degree of complacency (mine included). Everyone wants to set up a fund, leave his job and manage his or family funds, set up advisory services and thinks that the initial draw of gold in the mine is an assistance than more sheen awaits in a greater measure.

we are also meeting distruption of business models in a bigger and unprecedented way. Such times of disruption create great opportunities and great new set of outliers. But to identify them commensurate to their valuation today is not as easy as it was in 2015/2016/2017.

the market will always have some winners. Lesser money chasing such winners meant a longer run. Today with multiple social media forms, conferences, investor meets, investor paid registration events, subscriptions etc too much money instantly chases a new or relatively newer idea. The intensity impacts the longitivity of return.

You can run a marathon at a maintained or slow speed but are more likely to get tired fast if you start off with a dash or sprint.

I use this simple example to assess my view on the market: throughout 2015/2016/2017 I have remained largely bullish (save for just 2 months of demonitisation and economic reset) with many ideas at any point to invest and a craving for more funds to be available. Even with demon, had on 27/12 tweeted that things are looking up and immediately put investing in top gear. The reason was in my dashboard I had many companies looking fab.

as of today, I don’t see so many ideas. I don’t see too obvious an idea.

I think 2018 will mark volatility as a catalyst to to find value. It will be more of prepare today for a chance by judgement errors of few. To know where there is error or the judgement is right will depend on your own preparedness.

I don’t see a secular investor return in 2018. I see a more sophisticated investor in 2018 with a more moderated return expectation. The good news is you must have made a reasonably good corpus last few years so even if that compounds at a more moderate rate in 2018 you will in absolute terms do well.

to me 2018 is a year to get wiser. To be more selective. Thinking, fast and slow at work at its best. The highest return may not be made either by the guy fully invested nor by the guy sitting wholly or partly in cash. It will be made by out of box thinking and more tapered expectations.

To me a 20 pct move in 2018 will give room for a celebration.

With all my wishes for lots of good luck and happiness.

Cheers

(my standard caveat: article written in one go. I don’t proof read what comes from the heart. Typos show genuineness of my flow. Feedback always welcome).

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My talk at Investor Carnival

Hi,

a good morning to all of you. With the onset of winters there is that initial chill in the air. Reminiscent of markets too where some chill is catching up with investors view of possible returns.

while I am no expert to assess mkt moves and always remain skeptical of what relevance market has in a universe of portfolio specific returns, I was happy to recently make a presentation at the investor carnival.

i chose the topic of simplicity and what I learn from daily life on investing. I felt it best symbolizes human behavior which as per me is the largest edge In a market characterized by excess news inflow. Temperament inflows are not uniform, a clear example of this lies in volatility and interpretation of several events. The latest being the tax cut passed in USA. And much debate on Gujarat elections. Much of this overlooks the continued move of business from unorganized to organized sector, an excellent migration in play.

For those of you who are regular readers of this blog or my Twitter handle, post demonitisation and gst, my view has been to focus largely on organized sector. Most of this includes consumption in any form including by Roti, Kapda and makaan. (Food, clothing and housing)

my presentation focused on why we overlook simplicity and are fascinated by complexity in stock selection, decision making and in providing mkt views.

i also focused on the need to know yourself first as no two set of investors are same and can have same results except by chance which will be outlived with a longer time frame. Stock markets reward diff styles and hence one must attune within to get the best.

 

i used analogies from movies, cricket, football, baseball, ramayan, Bhagwat Gita, Bible, advertisements, driving to work and hence car and traffic, music and songs etc to show case Behavorial science as an essential element all integrated with simplicity, positivity and self knowledge.

much as I would have liked to, I cannot share the presentation as for that I need several legal clearances.

I do hope however to repeat the same in a knowledge session soon.

meanwhile lots of results have set in. The results are decent and I see some industry captains of repute talk of a pick up in GDP in 3rd and 4th quarter. I also see renewed fii interest (nov inflow was very healthy). Credit Suisse recently increased the weightage an expectation from mid and small caps who have truly been stars of this bull market. As we head out of the initial headwinds of gst and demonitisation and towards a more developing rural market, my outlook remains positive.

Many business models are being viewed as expensive based in pe but ignoring the disruption in place that can catapult to a look up in earnings.

I shall soon enough post further thoughts but nevertheless took this as an opportunity to share some initial thoughts.

Wishing you all a good festive seasons and lots to cheer and share.

 

warm regards.

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