Economic Times Articles
How to deal with myriad expert ideas and WhatsApp gossip to make money in stocks
What information consumes is rather obvious: it consumes the attention of its recipients.
If as investors, we are able to narrow down the items we need to focus on and then work only on those, including reading, discussing and thinking on those topics, it would be far more beneficial to us.
If we like a company, we should try to understand how it operates, what we should be looking for in their results to understand how the company is doing. These may be non-financial data points as well, how the competitive landscape looks like, what are the world leaders doing (may not be present in India) and such things, which can help expand our knowledge about the company and industry. The interesting part is that this sort of knowledge compounds over time.
It is very important to remember that what you say “no” to determines what you can say “yes” to. And what you can say “yes” to would determine the outcome of an endeavour.
It pays to look for reasons to not buy a stock; here’s how!
One thought pattern that helps immensely in elimination is having a healthy dose of skepticism.
Picking stocks is a negative art – one of elimination rather than selection.
One of my key learnings in the market over the years is to look for easy problems to solve. There are no extra points for playing a difficult game. I tend to ignore any complex investment thesis in any stock. If a lot of variables need to play out for a company to do well, then it is better to let it pass and move over to the next company.
How to dig for gems of ideas in companies’ annual reports
Reading annual reports of companies from an industry as a group gives a lot of insights into the competitive landscape, new developments and differentiators for any company.
In some industries, global reports can provide a glimpse of things to come.
Winning formula for stock investors: Ignore macros, focus on businesses
As minority shareholders, we are essentially sidecar investors.
But most investors that I know of try to forecast macros because they make them sound intelligent! The practical value of the forecasts is often negligible or negative to their networth, because it is wrong most of the time.
The one thing I understand is to focus attention on individual companies in the portfolio or watch list and their valuations. Even focusing on the broader indices does not help, since rarely any of us invest in the indices themselves.
The value investor’s checklist: What does it really contain?
The most important aspect to remember is that a checklist is a living document.
What I have realised is that beyond what is written in books an investment checklist should try and capture all aspects of investing – qualitative, quantitative and, most importantly, behavioural. It should also capture my own past mistakes to ensure they are not repeated. The behavioural and past mistakes are not addressed in most investment literature, but they are the most crucial in my view.
Credit, liquidity, bonds? But what do they have to do with my stocks?
In well-functioning economies, financial systems are not allowed to collapse.
As investors, our job is to understand the business we are invested in. We need to continue to focus on that business and the reasons why we have bought those businesses. Most of the times we get pulled into fruitless macro discussions, without pausing to ask how it impacts the companies we are invested in.
Businesses survived 2 World Wars, why worry about trade war or polls?
The challenge is that everyone wants to get rich within a short time. No one has the patience and mental fortitude required to hold on to good businesses over their business cycle. Business results, in general, tend to be mean-reverting, which means over time, great results become mediocre and poor results get better.
Investment strategy for election year? Just don't think too much
I will not hazard a guess on what the market will be like in 2019. Not because I don’t want to, but simply because I don’t know how to.
India is a $2.5 trillion economy today. At the current pace, we should double in 8-9 years and then double again in another 8-9 years. In this while, the market cap should also go up substantially from current levels, because a lot more of the large unlisted players would come to the capital markets through IPOs.
At a 100% market cap-to-GDP ratio, we are looking at an approximately $10 trillion market cap in 16 to 18 years. That is a five-fold rise at market level in this time frame. Individual stocks will definitely do much better. So, keep an eye for longer-term wealth creation stories, be invested in a well-chosen portfolio of stocks and fasten your seat belts for a bumpy ride.
Learnings from a year when even Buffett was caught on wrong foot
Google continues to be perhaps the only ‘irreplaceable’ company for now.
A lot of my younger friends have completely moved away from television. We have already seen completely new industries like food delivery and taxi apps come up over the past few years, which are riding piggy-backed on this convergence of cheap data and smartphones. Over time, this behaviour will pick further momentum and a lot of industries will have to adapt themselves to the new way of doing business.
