The breather

hi friends, i will start with an apology, duly aware that this update comes with a long gap. having voiced a rather positive outcome in the last few months, I felt like a gardener, who had sowed al…

Source: The breather


The breather

hi friends,

i will start with an apology, duly aware that this update comes with a long gap. having voiced a rather positive outcome in the last few months, I felt like a gardener, who had sowed all seeds, watered the plants,  nurtured the sprouts and enjoyed the outcome of some rather beautiful flowers. Thus I went on literally an off writing break, basking under the sun and enjoying the breeze, till night stuck and I realized someone had to switch on the lights and plan ahead.

When you are bullish, invested and things go along, really there’s hardly anything to write on. You start liking songs, even singing them. You just enjoy the feel of it all and thank your stars for being positive in life, being a believer throughout and then count almighy blessings.

and then you sit back in a more sober mood, literally as if playing the role of an author asked to describe a bit of the journey. You realize songs and dances were good and had their moments of joy but surely in every story there are some learnings. May be just enough to map the next few steps.

the last few months have given me little to complain. Though I must admit getting used to returns like this could be nothing more than a mistake. Returns like these also impose a sense of complacency, some arrogance and a lot of confidence that edges on the risk of becoming over confidence.

While every accomplishment in life must be cherished and celebrated, a conscious effort must be made to identify what could have gone better or went wrong.

the last few months gave me a personal boost to my long existing belief in diversification. In hindsight one can debate things as black swans or unknown unknowns, but the fact of the matter is an event may be unknown or a black swan, it’s consequence can still be more controlled though not fully controlled.

Many investors have felt the pinch of owning concentrated portfolios with the likes of names such as ipca, marksans, Ricoh, Poddar developers, Kitex, Welspun, Aym syntex, keltron, Infosys, dr reddy, mandhana, pokarna, mahindra finance, Saregama, indigo, Spicejet, sun pharma, bharat forge, idea, aditya birla nuvo, Orbit exports, Niit technologies, Ramco, Gati, vrl logistics, Balaji telefilms and such others. I’m not suggesting these are not good companies or that they are good or bad investments  but the fact of the matter is many of such stocks dented portfolio gains.

some might argue and maybe rightfully so that investing is an ongoing activity so one erosion makes less difference but the fact is in a market that had far many winners than losers specially across mid caps and small caps, such statements are more akin to a batsmen getting clean bowled and then looking at his bat as a blame than his own stance. Investors are more prone to feeling the loss than gains and hence nothing can hide this pinch. In fact ask any successful fund manager to visit his clients after such an inning and try raising funds and he will share a lot why returns matter even though they may not be the best, they should not pain the portfolio.

in contrast, most diversified investors escaped one carnage or the other and found the best stories and returns came from the most unexpected counters. Stylam, Kiri dyes, King Fa, Bodal, apl Apollo, kalyani steel, Tata metallics, Bosch, biocon, bharat finance, ujjivan, satin credit, Rpg life, emmbi Ind, Sutlej,  v-guard, yes bank to name an illustrative few.

Some of the above names symbolized undiscovered stories till they got discovered and re-rated like Stylam or kalyani or Tata steel while others had peculiar problems ranging from the sale of a business (Bosch) to a massive disbelief by prominent investors and bloggers (micro finance). The truth of the matter to be is no one in his right frame of mind goes out and buys a name like some I named as a concentrated bet. Most of investing always has been and will continue to be a path of discovery, lead by unfolding of stories and scalability, blooming of first generation managements and a small base result becoming a habit till it gets noticed by many and has more risk in its price and higher bets on it than in its early years.

Another learning for me and I take this as the best one for the year has been becoming more selective of the people you deal with. Social media is a boon and a bane. It gives you lots of things to read, to interact with many people who you may not have even met, allows for public display of views, criticism and appreciation but rarely lets you do more than play to the masses.

along side come a battery of people who just can’t digest any one’s view and who constantly attempt to either push a vested agenda or a persistent view without facts. It’s best to ignore them and keep moving. Trust me you are priceless if you are headstrong and will find many good people if you eliminate just a few not so good ones. Read the art of tidying up- a fantastic book.

the most pertinent learning has been not to react to everything. Every day some event happens at the country level, international level, company level. You are not the karta of the world so best don’t try to be one who thinks he can measure the impact of everything and react. Just be the flowing water and even if you find some obstacles or set backs, you will flow if you believe  you can. Read Martin seligman’s great works on optimism and Michael csikszentmihalyi’s great book called Flow. For heaven s don’t read millions of tweets on what Buffett says or munger says. Very few people know their context and most feel it’s a chant even if you don’t know the God (context) for whom you are chanting.

It’s also important to find multiple sources of knowledge. We are in a path of distruptive innovation and value migration and for example believing in just 2-3 blogs including mine will take you either no where or only marginally ahead. The greatest wealth in the last year or more came from some rather unconventional companies  or the most obvious ones who most wrote off as either too expensive or too against. Asian paints, Kansai nerolac and Bosch being good examples.  Remember by its very nature distruptive innovation is not predictable so don’t stale mate on just some fixed thoughts. We are humans, we will err, some will learn and move on, some will still lurk in hope.

finally, I personally feel investing is getting tougher. One due to complacency- too many believe they know it all, few will survive either a stock on slaught or greed or fear. While it is heartening to read global cash levels are the highest and more people talk of corrections than finding ideas, the fact is the bull run is far more selective in its behavior than being widespread and many have missed the run or having made money lost it inane attempt to juggle too much.

There are sectors showing some great results and one just needs to keep eyes and ears open and invest regularly. Every step counts and even when you are tired you know to reach your destination, you need to keep walking.

on this note, I conclude this mid night update. With the assurance that another update to reflect the sectors that to me hold promise will follow very shortly.

till then, do anything, but don’t “bear” with me  for I am more of a perpectual believer and “bull”.




Disc: articles written with passion don’t have spell checks. They are just a flow and will always be. I am not an investment advisor or Sebi regd consultant and the views expressed are my own. They may not work for others but they do reflect an intent of truth and integrity.


March has come and gone where’s the update

hey friends,

my profuse apologies for not posting in March. It was a month that was momentous for an investor. After the correction of January and February, at an IIF Meeting I was asked to give a talk on investing. The market had fallen some 1600 points on bse in 4 consecutive days and the investor mood was solemn.

Hardly anyone in the audience was keen to discuss a market up look. Most were worried about how fast and furious the fall could still be. Levels of 5500 on the nifty seemed to be in general consensus and china, bank npa in india and what’s for lunch that afternoon was more of the mood.

I was promoted in the order of speakers to deliver the talk, much to do with the generousity of the event organizers and a bit more to do with the fact that some felt one bull could be done and over with before a more serious talk on markets and technicals and charts and dooms could set in.

as I went ahead to start by talk, I changed stance. I told the audience I am prepared with my traditional talk but looking at their moods of gloom and doom felt it was better to ask them to quantify their concerns on china, fii selling and on psu bank npa’s. At a 7000 nifty level and several scrips beaten down I tried my bit to suggest the extreme side of fear vs greed.

as an indicator I suggested that only a few days back in August 2015 the market had tanked 1600 odd points in a single day but no one remembered that as the market pulled up immediately thereafter and things were back on track. This would be a no different situation was my thought or if not, it would not fall as sharply as was the concensus. My only logic (absurd as it may sound) was even the worst of companies and troubles were in the stock prices. I explained an inverted structure. Assume you wanted to make good gains in he market not by buying but by selling what could you sell at the prices that then prevailed to safeguard your capital and make a decent return.

Having been negative on metals and psu banks for years, I emphasized that even those looked dangerous to sell by the inverse theory. I told the audience the market had an imperfect recollection of its problems. China, Greece, Brazil, bank stress tests, currencies. That moment also trending were fears of long term capital gains (we were in the midst of February), a wild mid cap crash, a complete overdose of everything negative.


you need to factor this now in hindsight:

-a room full of investors who had assembled with less interest in buying that in soothsaying

  • a super active electronic media predicting doomsday we most time being given to intra day technical guys who were sounding like they were sent by th lord himself to curse a wrath on anyone daring to buy
  • all across fii selling and market pull down despite the fact that even after such selling and market fall, Fiis has 90 percent plus invested in india. In other words for the bit they sold they already pulled down a substantial part of what they owned
  • My own cfo in our office despite being a finance guy with years of experience and lots of wisdoms, gyrating between whether he should sell his pms at a loss, just a few days after he had delayed his decision to add new funds
  • Debates across admitting on nifty targets and on a sure shot belief that long term capital gains would come despite a steep market fall
  • a correction in a stock to the tune of 5-10 percent on any selling amidst low volume as there was no buyer
  • god knows what more

the scenario was making me more bullish.min fact I remember and thankfully found a support in another friend, Nooresh Merani joining in later to blow his bullish trumpet. It excited me so much that much to the surprise of most, I rushed back on stage to draw more attention of the crowds on why a good rally was around. A few took notice.


We we are now through March. Call it luck or randomness or whatever you feel. We had a rally. A good rally. A decent rally. A rally that left many. Several sold off equity, several reduced allocations and several moved into deposits and gold and became mr doom in the chance to bloom.

whether history rewards the brave or the cheeky survive- we don’t know until it passes through. However investing is not about shouting shop in uncertain times when the uncertainity itself is beyond expression. The fears of 2008 seemed to be more in impact brought in by a strong historical bias and fear than a rational check on general world awareness, monitoring, inter global dependency, pockets of isolated growth such as in india, RBI’s superb intervention (Gov Rajan is one of India’s best thinkers in control) and the fact that as a cardinal rule stocks being attractive when their valuations move to cheap or relatively cheap conditions seemed amiss.

some of us took a deeper breath and lived through. Opportunities like these are blessings for a passionate investor has an inner self that tells him xyz is now better, safer, cheaper and opportune than say another co that he may own. Portfolios undergo their own stress test and some stocks stand out almost automatically at that time.

I used the opportunity to enhance my position in the stocks of highest conviction as the relative valuation of your best bests stands corrected against relatively experimental bets.

In one month we are back to decent levels. Some smiles, some joy of returns and a lot more strength in the comfort of the portfolio. Until the next time when opportunity strikes. And we again march on.

Happy investing.

i have just concluded an interview for Vishal khandelwal of safal niveshak who does an excellent passionate task of educating investors across. Do read it if you are a subscriber to his almanac. Sometimes I erroneously say a few things that turn out ok driven by passion rather than intellect. Or may be by smart editing of people like vishal.





i type fast on an iPad

i don’t check spellings when in a frank flow that’s like a chat ( I check a lot of spellings when I advise on IP)

I am not sebi registered and though I took care not to talk of specific stocks I recommend you to consult a sane person for your investment decisions

I may be currently going through an astrological phase of randomness. But i am praying it lasts and I spread it well.



Happy Valentine’s Day

Happy Valentine’s Day

Hello friends. This update starts with an interesting anecdote that attempts to explain my reading of a situation we are currently in.

On 8th February, I created an original tweet. It went like this:

Dear February,
just because it’s Valentine’s month,
we don’t need to see Red every day.


Stock Market

#valentine #bse #nse

In matter of less than few days, this very tweet went viral.

So much so I got it back from others all across india and it was even read out on Bloomberg, albeit as a forward.

Some of the sources who forward it back to me claimed it was from them and later a few admitted to have received it as a forward. The source was never discussed.

Hang on.

This memo is not a grudge memo, although in a market fall, it is usual to have grudges.

Our lack of education in schools and colleges on risk or loss management adds to a situation where we lose control of what is logical and start piling on mass beliefs. While this should ideally sound logical, we forget that mr stock market is a believer against majority.
The point of reference to my tweet was-

1. We live in a world of mass connect;
2. We hear a lot of views and even forward them causing a greater belief on these views;
3. We hardly investigate sources more so in falls as every thing seems justified in a reasoning even though we defy the same logic when markets rise and show a far higher sense of confidence in our actions.

Relate my tweet to the current market scenario.

December end, we all were told by all channels, magazines, experts, consultants, funds that as we end 2015, we will dawn on an exciting 2016. New allocations to fii funds will keep their interest alive while retail would buy so much that “inevitably” it would overtake fii buying. Hence with both fii and dii on the buy side, the markets would continue to do well. At best, the debate could vary on “how much” but not many seemed doubting the sense of direction as UP.

Look up the sensex and nifty targets of majority of Broking houses and the stock recommendation reports. It was a buy one way or the other.

All this news of buys went through blogs, whatsapp groups, social media, print media, electronic media. There were investor camps, dhamaka earnings, multi bagged views, what all.

We were cruising till an ice berg hit. And Twitter was all about Titanic.

Immediately we saw and are seeing flash cards of one “negative” after the other:

1. China
2. Oil
3. Redemption by sovereign funds
4. Global markets
5. Concerns on Lack of liquidity with investors
6. Leverage
7. Rumors of long term capital gains
8. Fears of usfda on every pharma co
9. Fears of slowdown of consumer cos due to rural slowdown
10. Banking problems in psu- as if these were not known for months ahead- unless we chose not to even believe our own capable governor when he kept warning of this.
11. Slowdown in infra
12. Whatever as it all works in a contagion.

If my small world, a tweet found its way to several lacs of ears, now imagine the impact of all the giant tv channels, the huge network of Broking houses, the network of whatsapp and social media groups, the print media, the word of mouth spread of all this negative every passing minute.

Investor camps eager to catch the next big idea till December 2015 look like gas chambers. Get me out. How much fall is in place- have replaced the optimism. All in just a few days.

The cascading effect has created more chaos.

Each thing is being correlated to bad.

Don’t buy strong brand companies as they are expensive- (though all have become cheaper relative to December and have a history of wealth creation)

Don’t buy pharma as USFDA will strike soon and valuations are not in sync. (Till December it was a story of a secular bull run)

Don’t buy private sector banks like Hdfc bank or Indusind. Why? Oh the effect of Sbi and likes would son hit them too. And now some are more expensive than others. (By the way at any point of time in any sector, the best is always more expensive than others. The question is is the best doing well)
Sell stocks no matter what. Even if history supports gains for decades. Even though equity is the best class of investing. Even though buying in biggest disasters proves superior returns.

Interestingly it wasn’t one factor that lead (or is leading) the fall. We had a reason every day. Almost if we didn’t, we could have typed “bad news” on Google and found one and somehow co related it.

The effect has been a fall in scrips across sectors.

While it can be argued that some scrips deserved to correct (read 27/12 blog update: jaago investor jaago- froth in several second line stocks and the tweets on a blind froth in mid rung pharma and IT) the moot point is markets don’t spare even good companies in a liquidity exodus.

Hence even if one Broking house that I otherwise respect, got the sensex target right at 24000 odd, one forget even the stocks liked by the same Broking house were equally battered.

Picture this:

A consumer company well loved and believed to be all weather stock fell from 17000 to sub 10;
A branded food company that wasn’t plagued with a maggi sort of problem fell from 1700 to sub 1000;
An Internet co fell from 1600 rs odd to 400 rs odd;
A pharma co much recommended fell from 1800 to 900 while its smaller mid cap from also highly recommended just till a few days back from 108 to 38;
An automobile co that has been posting good results last few quarters fell from 3300 to 2200 odd; to name a few.

In the same breath psu banks, psu stocks including a recent offer for sale, metals, cement, auto ancillaries, mid caps, small caps, God knows what caps etc fell. Yet it seemed that the fall in this category was more than the fall in some of the examples I shared. Why?

…..because some of the mid caps and small caps had given good returns before falling vs some stocks that have seen a secular fall for the last few years. Mind you, even some of those in secular fall feature in long term wealth creation.

What does that mean? Why do we see the falls as doom and ignore the recent past of gains as a given?

Doesn’t it suggest that stocks off and on gain and correct and as long as the gains insure us from the pain of falls, we are fine.

Doesn’t it suggest that as highs, there is overdose of information “interpreted” as positives, while on corrections, we accept everything as an endorsement bias of negatives. Most of it just “emotions”

In the community of investors, reside many:

Some day traders
Some technical
Some short term investors (many)
Few long term investors

The last category get featured in books. Which are meant to be read. And learnt from. Why is it that these few have portfolio sizes that can leave many with their mouths open. Do you think these guys never went through falls? Forgot 24/8 just in 2015? The market was down some 6 percent in one day. But it was forgotten. Why? Cause things “eventually” looked up. multiple examples of a similar kind exist.

Suddenly there is no talk of bull market. Headlines read “we have entered a bear market”. But why? We don’t know. Just because we saw 2008 and just because market levels have come to some month lows- we so believe. Just as we believed that at the end of December we were in a bull market. In fact we thought we were well equipped to even know what phase of the bull market.

I don’t doubt there is some global nervousness. But in my view, not all is coming from true bad news. Some of it is coming post a good bull run (corrections are natural), but most just from a flash of 2008. Ppl fear the cliff of 2008 and thus are resisting buying when they are getting some fab cos at great prices. And more than emotions, it is the cascading effect of a lot of negatives floating around.

We talk all year on Buffett and Munger. Are they selling? Did they buy the last few companies in 2015 worrying of their destruction in 2016? Why are we not quoting them now but will when stocks rise to highs and we feel we were tutored by them. Do they analyze china by the hour? Can they? Do they check every day what fii and dii are doing? Or what others are doing?

Imagine you own a barrel that’s empty. It has the capacity to take in lots of water. Occasionally it will leak either due to an sudden speed surge of water being deposited or Occasionally some water will be lost to evaporation. Or someday you don’t feel energized enough to come to work to fill it. Some days you are so happy to see the water filling up that you have fun. Splash some water on yourself or friends and lose some water. Some days you drink the water as you are tired and thirsty but don’t fill it. As you know you can fill more over time.

You fill the water with a mug. The mug draws water from a tap. The tap runs and you fill water commensurate to the size of the mug as you cannot lift the barrel or drag it under the water. You have a limited capacity to fill it. Further many queue up with you for the same tap. As they all too have to fill their barrels. So some days you wait longer to get water. Some days your turn doesn’t even come and you queue up again.

Suddenly someone comes and says water will be obsolete. Without applying any logic the news spreads across. Few turn up at the tap. Many think it’s a lost cause. The queue has few takers. You lose track that your objective in the first place was to keep filling water. You know water has an unlimited use. But because of sentiments you chose to join the comfort of negative news.

Water here is your equity. The mug is your income that enables you to fill it. It comes in every month and is used by you to buy equity. The barrel is your portfolio. Your wealth. The queue is a bull market.

Ignore the negatives. Hundreds of years of equity investing teaches you- keep investing. There is nothing as a known known in markets. Prices are never static. Wealth creation is never a on and off game. It is a game of discipline. Some say we won’t buy a stock we liked at 200 at 100 now but will buy it when it bounces up. First it won’t knock on your doors to tell you: hey I’m about to rise. Many stocks hit limit up of 20 percent for several days when markets regain their vigor. You are ignoring at Cmp you can buy more for the same amount you would have spent at 200. More makes your net investment price lower. Even small incremental differences make huge differences due to compounding.

If you want to believe Buffett or Munger or Marks or even some of the smartest investors and fund managers , why do they talk of returns over a period of time? Why do some ignore noise when it’s loudest.

I do realize this article has come a bit boring, a bit too long. But it’s come from the heart as always. Wish you all great returns.


Caveat: not Sebi registered. Be safe, seek advise. Keep good company of people and believe in life.

Introspection over a cup of coffee

Hi friends,

instead of a blog update this month, I was invited to do a guest write up for Dalal Street Investment Journal (

accordingly my thoughts on the market appear in the issue dated 8th February 2016, at pages 30/31. I think they have come out simple and well.

i hope my thoughts resonate with some of you in your quest towards long term investing. I look forward to your cherished comments.

standard disclosure: I am not a registered investment advisor. The views expressed are personal and out of passion. You are advised to consult with a professional or exercise due diligence.

happy investing. Enjoy the coffee and the thoughts.

jago investor jago

hey friends,

I have in the last few days come across so many investors who have met with success in the last few years in owning mid caps or small caps.

Well done.

It’s great to see that so many investment decisions have been duly rewarded and many investors are happy.

however being a keen observer, I have noticed another trait. one which seems ridden with lots of pits and which could undo a lot of gains.

most investors who have been successful have now started taking themselves to be akin to fund managers despite very little experience.  the feeling around is they now have the mantra,  the secret ingredient that will lead their portfolios to more multi bagger returns through 2016 and beyond. some believe they will do 100 percent for many years running. Even at the cost of sounding childish and over confident.

the following traits were observed:

a) most of these investors have a history of being in the market for not more than 2-3 years. they have never seen a market crash and have thus participated in mid and small caps at a time when the overall small and mid caps have been on a dream run. Sometimes people overlook a trend and take too much credit for it forgetting humility and embracing arrogance and over confidence;

b) most of these investors had nothing to do with investing before this 2-3 year stint. most were in jobs or still are and now feel ripe to be captioned not only as full time investors but “advisors”. Many are thinking of giving up their jobs believing they have a smooth road ahead as super investors quite oblivious of long term trends and impact of market crashes, cracks or reversion to mean. My advise: please don’t sacrifice “certainty” of income in a stupid belief that you are the next hot fund manager or advisor. Remember there are still a handful of the guys at the top and even they are more in tune with the fact that they don’t always beat markets or get more than moderate returns.

c) most of the investors turned advisors  never found one idea. They were fortunate to read ideas on many mid caps and small caps through some form of media and assumed that ideas as of their own origin. They forget that “overall” it was a great time for mid caps and small caps and even by historical standards, a dream run in such stocks. The overall lack of ownership in mid caps and large caps and a general high inflow of news from hitherto unknown or undiscovered web sites, blogs or the like has brought in a “flow” of like minded investors or believers into a common pool of ideas. More like group sourcing. When the tap runs dry, many are left thirsty. Learn to dig for water.

d) they believe a lot of the stock upmoves in what they own is their talent or doing-ignoring that in most cases they do not even own 1 percent of the co and do not influence 99% of the owners. They also forget that many of the stocks owned or purchased may have been illiquid and thus even with one or two credible names entering them a mass revolution of buying and believing started. They think discussing stocks on a whatsapp group is enough for its rally and ignore historical data where even the biggest of names have not moved stocks in a one way move. They forget markets are not a voting machine but a weighing machine.

e) there are multiple cases of assumed personality of Columbus now around. It seems what has not gone up is “undiscovered” and many Columbus voyages to discover the next multi bagger are underway. Just because quality companies have run up and become expensive, a flow is extending to usually laggards in a catch up with sector valuations. Sadly a lot is being taken as easy money.

My friends, my role in this article is only to look at history and suggest we all learn from it. Every bull market has some dubious stocks hitting new highs. Most die sooner than one realizes or remembers. Every bull market makes many an investor gullible and over confident and  history leaves trails of larger losses than gains- a fact demonstrated in the statistic that less make consistent gains in markets than those who lose money. Try and be in a controlled thoughtful and cautious frame of mind. Be protective rather than careless. The fault lies not in the discipline of investing and sticking to quality or certainty but what is undone in a state of haste, exuberance, hubris and what Nassim Talib calls “fooled by randomness”.

Simple economic theory proves that in a sector there are a few leaders and many laggards. In any profession, some succeed many lag. It’s a known fact that many companies self destruct and very few companies sustain. Something that even prompted a fantastic book BUILD TO LAST by Jim Collins (and its follow on book).

It is completely impossible for all companies to be doing better than a sector average and almost improbable for all companies to sustain growth and valuation above a sector average. Even in economics, we were taught on the law of diminishing returns in a sector as efficiencies set in, economies are utilized and competitive edges of the past give away to a new order of destruction and disruption.


Greed hits not only investors but also promoters and their pursuit of ways to make quick money.

while the market is a fascinating place and there is lots of wealth to be made, don’t lose track of some basics:

  1. Read Read Read
  2. Don’t take the market or stocks or returns for granted
  3. It is almost impossible if anyone tells you he made 100-200% returns to match these returns. Ignore him. He is a passing phase with little or no experience and very little history of success and no experience of sailing in a storm. I would bet many would burn out now in this over confident pursuit of unknown unknowns. Even a good fund manager’s returns are measured over longevity and usually in ability to safeguard the returns in adversity rather than in blind moves. History has examples of IT boom and crash, Realty stocks boom and crash, Infra boom and crash- in each cycle you will see traits of latching on to a rather poor set of companies in this blind belief that another pearl was discovered by a group of quick return investors. Most of whom are now out of the market for good.


Happy Investing.

Caveat: I am not a SEBI registered consultant. However I have been in the market to have seen and to be aware of several ups and downs and the fact that its imp to sustain.


Don’t be a cry baby, be a buy baby

Dear friends,

here’s the link of the article I wrote at and which was posted on this Monday morning.

Thank you for your overwhelming response to the same. Am humbled.




Take a deep breath and smile

Hey friends. What a day I chose to update the blog. The news of an election loss for the ruling party just came out. Although is may have a short term impact on markets, it’s important to understand that a market does not have to only fall or rise.

A market can choose to do nothing.

Frankly I expect that until the year end (which fortunately is not too far away) the markets may just do. Nothing. There would be debates on whether parliament will function or there would be more walk outs, protests, noise.

We are almost done with many results, the finding is a mixed bag. Large caps in banking (public sector), two wheelers, infra and capital goods like Larsen Toubro, large pharma like sun, lupin etc are struggling with nos. Some like Dr Reddy now have Usfda overhang. Some like thermax and Larsen have reported slow down in order books. And some like Abb, Siemens, Bosch etc remain good companies at a very expensive valuation.

Mid caps look fairly valued commensurate to both their results and recent run up. Recently I had tweeted that mid caps look fairly discovered, owned and valued.

Frankly it seems to me, at the risk of being wrong, that the market looks tired. There is that feeling that about two quarters onward earnings will improve, credit cycle will be more liquid and interest rates lower. Govt spending may improve, tax rates on corporate taxes may see a bit of softening. But as of today many cos are either fairly valued or even expensive.

An investor may feel happy at market rallies and bad when they fall. But given that equities are a long haul vehicle, boring markets are actually not bad. I intend to use the coming few days to:

A) evaluate some of my past holdings to see if the growth story continues. We sometimes get too carried away in our winners and complacent about sir strength (read valuations). Sometimes we are blinded by the fact that the world and systems are changing too rapidly and a competitive edge that seems sustainable is far more apt to destruction today than it ever was.

In a recent issue of Fortune, I read how global CEOs believe a good co must disrupt 4 times in 10 years. The cost of disruption is evident at the pace at which wealth is being created and displaced.

Today the morning papers spoke on how Facebook has undone GE in its rankings. This trend is likely to continue.

B) some of the stocks we like will become less likable. Nothing wrong with them. Just that some other cos will throw relative attractiveness either due to valuation or new changes. Have a look at some of the recent corporate results. Some of the most written about companies are witnessing disappointing results while some less glamorous cos are reporting better nos or projecting better times. It appears that the usual rules of economics in demand and supply and scarcity causing a higher than fair value are playing out.

It may be difficult for many to know this now or to be right or wrong but there is one good rule that applies well in investing. Companies with good managements usually bounce back and get on track. Which means when good managed cos have a stock market thrashing or a quarter or two off and hence loss of “demand” and abundant “supply” you can take out your fishing rods and sit patiently in the sun hoping to hook on a good catch.

C) I would be personally happy not to over stress to find multi baggers. I feel from my interaction with some and a lot of reading investors are taking multi baggers as anything that’s cheap relative to market. I see more investor talk on cos from a valuation perspective than a qualitative perspective. The whole investing community of india thinks they are Buffetts and Mungers and that all know all moats. This is an art that comes partly by a sound knowledge, partly by a market participation fee and partly by psychology. Some have it but also have temperament and capital. Some have it but have borrowed capital and hence a pit waiting for a day for them to trip. Some have no temperament nor knowledge but believe they have access to some blog, web site, Twitter connect, broker report that would be their Aladin’s lamp.

Guys be patient. In a run up from just 5500 to 7500 odd several stocks have gone up multi food even though market move in far more muted. Take it partly as good timing and partly as a pat for buying some good stocks and not too many bad ones. Now spend time pausing.

Use falls to buy your convictions. Borrow less and save more. Find some good friends and be under their sensible approach to capital building rather than a 20/20 match. It is not usuall for stocks to keep multiplying very rapidly. One bag egg in the basket can rotten the entire basket.

Don’t be swayed by unknown names. Some times cos have magical qtrs but never sustain them. And then when such inherently poor cos fall many turn around and say markets are a gamble and that everything is rigged.

When you run too fast sometimes it’s good to slow down. Observe the nature around. You are bound to find another good spot to run, a bunch of flowers that not many have noticed in their running past them. Read good books. They are like a good breakfast that enhances your temperament your discipline and your approach to a valued process.

As we turn the year to a new Samvat or Diwali, I shall share some experiences I went through last few months.

My greatest experience was winning the love, respect, affection and in some cases, friendship of some of you. I was humbled to meet some of you and see how much you look up to me with the blog that I am a well wisher. Truly a multi bagger for me.

I also saw some of you are truly devoted to learning. In your interactions you are keen to learn the process and not jump to stock discussions. I feel that will hold you as winners in times to come.

I also saw an automatic cut off system. Partly from me partly by a natural process. Negative ppl or thoughts should always be away. Neither are such people worth it nor is the process somethings you have to live with. It’s one life and you shall have enough of your good people around to bother about others.

Finally coming to some sectors or stocks, I am quite impressed with the way some private banks have been taking psu market share. I see this continuing. While someone sways you to say the entire sector is plagued do read some history. There are stocks there with the likes of Hdfc bank, Kotak mahindra bank, Indus Ind bank etc that not only have given phenomenal returns, they have done things to maintain their edge. Even today Uday Kotak says every night when he sleeps he wonders if he will wake up and have his bank intact. See the positives in that. For years the bank has been a huge wealth creator. Aditya Puri sounds confident about what he is doing. See Twitter account of hdfc bank and you will get an idea about how much innovation is at work. Little surprise that the bank has a ranking now in the top banks in the world.

Nbfc look good. Partly by their business model hat allows them to customize at a far swift pace and partly by the fact that with a smaller lending per customer they have greater pricing and lesser npa.

Pharma is under going a great global story. True many are now expensive. So wait. It will cost you nothing. Markets have heir bouts of insanity on select days. Be the punching tiger on that day.

Speciality chemical cos look interesting with their Patent pipelines. One of the best wealth creators last few months was a co called Navin fluorine. There are many more such potential winners.

Keep a watch out on some mnc cos. When great parents focus on children the results are usually tempting. I recently read on a few of them getting serious about India. Some of them are not even unduly expensive.

The prospects of housing finance, one of the best performers since last few years continues to be robust. Ignore the negative talk on land not being sold. Some of it is to do with a complete mess up of builders some to do with speculation. No sane person would not desire to have a better house. And am end customer chooses his dreams. His housing finance enables him to do so. While this is not a recommendation, I think Dewan housing runs a fab advertisement featuring the super Shah Rukh Khan explaining the importance of house loans. No slowdown lasts when it comes to roti-kapda and makaan.

Select pockets of consumption look reasonable. In branded clothes, tiles, tyres (5 are sold for every 1 car) and similar pockets. Some good companies have announced very aggressive capex plans that make their mkt cap look promising if one goes by their history of success.

Be friends, be believers, be patient, be progressive.

We have a long path to our dreams. Never stop dreaming.

Happy Diwali and my best wishes
Disclaimer: the article refers to some stock names for illustration. I may have vested interest in some. I am not a sebi registered advisor and may well be wrong in my views. I will not be wrong in being an optimist in life 😀

Some thoughts part 2

2. The never ending debate between concentration and diversification:

in my investing years so far, I have read several books, heard several speakers, read various articles, blogs, subscribed to newsletters etc only to learn each individual has his own style. It’s the comfort of what works for you that sets in to usually guide you on what you should do. However why I am personally in favor of diversification is-

a) a concentrated investor usually owns a handful of stocks bought at a certain price. Since traditional teaching tells us you need to buy right and sit tight, and stock prices the,selves never sit, it usually follows that post a stock,price rise, a concentrated investor never buys more and thus keeps adding cash waiting either for a fall or opportunity. I assume this can’t go on forever in terms of opportunity to add another company as if it were then by sheer addition itself there would be diversification. A cinventrated investor thus is not fully invested and chooses to hold lots of cash. Imagine if you were concentrated and owned 60 pct equity that does well and 40’percent cash.

the market does well and your 60 percent invested say goes up 50’percent. The rest 40 percent in a saving account or fixed deposit goes up say 6 pct post tax. Your total,portfolio returns then are 56 pct, which is phenomenal. However if instead of earning 6 percent you owned more stocks having bought other good ideas or seemingly good ideas and because of a rising market made say a lesser than your top bets return of say 25 percent (half) would your overall portfolio returns not rise??

In other words, what counts is absolute money made. To ignore the 40’pct computation in assessing how well the rest did is itself a falacy.

Buffett himself talks on this. He says you are playing baseball and someone keeps throwing pitches at you. By pitches he draws an analogy to stock prices. Some days the pitches are high and you do nothing. Other days they are low and you swing and hope to get a home run. In a diversified portfolio you are an allocator of capital based on the availability of cash, the concept of limited resources (cash) being capable of put to alternate resources (opportunity cost) and a stock market which more than ever before gives you so many opportunities. Why i say more thnk before is:

Globalization has been a game changer. We have a market with heavy fii influence and an extra ordinary media coverage on companies literally by the minute. In such an environement even an issue with a fund in one part of the world triggers a reaction within india. A problem with a co that just beats street expectations and put up its best result puts a pressure of more build up vs sustainance of delivery buying vs it’s now in the price reaction triggering the price to fall. A black swan in the company or elsewhere causes nervous prices. And how!! China, Greece, interest rate fears in usa, quantatative easing, npa in a bank that has lend to a company that is troubled and its impact collectively on interest rates, crude, commodity crackdown or rise, forex issues etc….the list never ceases to end.

Thus stocks are far more volatile than before. Which also means they throw more opportunities than before. Usually not limited to where you concentrate but everywhere. You are not beating your best bets when you buy new you are beating your cash returns.

I will also clarify- when I buy where I see opportunity I won’t necessarily sell just because it has gone up. I will sell only if my cash has better use. And if I can get a 30/40 pct vs a 6 pct I’m good.

Markets also fall. They always do. and when they do it cascades into almost everything falling. Why? Cause when someone makes a loss on something his psychology tells him to make good the loss by booking profits elsewhere before they disappear. This update is not intended to capture if that is right or wrong but that’s the usual behavior norm.

When stocks fall I have always got a sense of where I want to build up vs where I would like to encash. The reluctance to deploy cash is usually met with a switch over strength and what I liked more than others is now within a better “buying power”. As long as one day before my returns on non core are beating cash in bank, I’m good.

my own journey also benefits from another buffett thought: keep cash flows coming. The word is flows not stagnation. They May come by stock appreciation of non core and your beating the banks or by other sources of income ( I work and hopefully hard enough) or other sources like rental incomes or dividends etc.

Hope to update the next line of thoughts in a few days.

Happy investing and happy learnings. Feedbacks welcome as always.

There are no stock disclosures in is write up. But for the sake of good processes, I am passionate on what I do including investing. And not a registered sebi analyst. One thought of action may not be conducive to a completely different set of circumstances and like I said earlier, success has infinite molds.

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