FY 2013 has been a remarkable year in stock markets, like every other year!!
There were the usual ups and downs, the usual spectacular rise and equally dramatic fall.
For me though the standout part was that i felt Mr. Market was exceptionally right this time.
We know by definition stocks mean "A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings" and if one observes that stocks that have lost most of their value actually had issues on their earnings or assets.
This makes me realise that Mr.Market is getting increasingly good in his work and we will need to think of newer ways to beat him ( Can i see the exotic options, intra-intra day traders clapping their hands? ).
Sorry to spoil the party guys, but we don’t need newer ways. What we do need to do is re-learn the old ways (I know its boring, but Buffet,Munger, Graham still work) and more importantly practice what we learn.
So here is what I am trying re-learn and practice for next few years
1) Quoting Munger, " All i want to know is where I'm going to die so I'll never go there" and here are the places i don't want to go
2) All business are either cyclical or non- cyclical- Take your pick!!
I learnt the lesson hard way, when I convinced myself few cyclical businesses as growth or value buys.
Therefore, going forward the first question to hence ask would be what determines the demand of the product which company makes. Hopefully that will give the clue to whether the business is cyclical or not.
3) All business either posses a competitive advantage or they don't
Its the hard truth of our capitalist world. Most companies function because their functioning ensures that value chain keeps moving. I have often confused this with competitive advantage to my regret and loss.
There is no perfect tool to evaluate this but endeavour would be to use Porter's 5 forces model, Moats suggested by Pat Dorsey etc to try and atleast give a shot at this.
4) All stocks which crash/our cheap don't automatically become great investments
There is a famous saying in poker, that if in fist 30 minutes you don't know who the sucker is then you are the sucker.
Similarly, when a stock falls dramatically and you buy it just because it has fallen so sharply, pat yourself because you have become the sucker.
I patted myself quite a few times last year and don't intend to ever get myself patted in that manner.
That's it for now. Here's wishing all of you a superlative FY14.
Regards,
Saurabh
There were the usual ups and downs, the usual spectacular rise and equally dramatic fall.
For me though the standout part was that i felt Mr. Market was exceptionally right this time.
We know by definition stocks mean "A type of security that signifies ownership in a corporation and represents a claim on part of the corporation's assets and earnings" and if one observes that stocks that have lost most of their value actually had issues on their earnings or assets.
This makes me realise that Mr.Market is getting increasingly good in his work and we will need to think of newer ways to beat him ( Can i see the exotic options, intra-intra day traders clapping their hands? ).
Sorry to spoil the party guys, but we don’t need newer ways. What we do need to do is re-learn the old ways (I know its boring, but Buffet,Munger, Graham still work) and more importantly practice what we learn.
So here is what I am trying re-learn and practice for next few years
1) Quoting Munger, " All i want to know is where I'm going to die so I'll never go there" and here are the places i don't want to go
- Companies with high Debt/Equity
- Consistent -ve cash flow from operations
- Continuous equity dilution, except in case of Banks and NBFC's
- Companies having high number of pledged shares
2) All business are either cyclical or non- cyclical- Take your pick!!
I learnt the lesson hard way, when I convinced myself few cyclical businesses as growth or value buys.
Therefore, going forward the first question to hence ask would be what determines the demand of the product which company makes. Hopefully that will give the clue to whether the business is cyclical or not.
3) All business either posses a competitive advantage or they don't
Its the hard truth of our capitalist world. Most companies function because their functioning ensures that value chain keeps moving. I have often confused this with competitive advantage to my regret and loss.
There is no perfect tool to evaluate this but endeavour would be to use Porter's 5 forces model, Moats suggested by Pat Dorsey etc to try and atleast give a shot at this.
4) All stocks which crash/our cheap don't automatically become great investments
There is a famous saying in poker, that if in fist 30 minutes you don't know who the sucker is then you are the sucker.
Similarly, when a stock falls dramatically and you buy it just because it has fallen so sharply, pat yourself because you have become the sucker.
I patted myself quite a few times last year and don't intend to ever get myself patted in that manner.
That's it for now. Here's wishing all of you a superlative FY14.
Regards,
Saurabh
