Hi Richdreamz,
Dont know if you still hold Gruh Finance. What’s your view on bandhan Gruh merger? Thank you!
Some learnings personally,
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It is a lot better to be a “fool but willing to learn and act” rather than an educated person who is stuck to his/her opinion based on self rocket science analysis.
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No cyclical stocks please. It is difficult to sell at top when there is so much optimism at the top of a cycle that a contra position leads to heart burn etc. Secular & consistent growth stories please, even at a moderately higher PE. I’m willing to wait patiently for earnings to catch up.
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Hi
Do you still hold CCL ? Whats your view on its retail foray and its future growth prospects ?
Thank you
Hello @Richdreamz,
Your posts are full of conviction and well-thought out conclusions. You are right to a large extent when you write that the market does not care for excel sheets and elaborate theories.
However, with due regard, sometimes, the markets do behave irrationally in the short term,though these aberrations get corrected in the long term.
For instance,at this time in late January 2019, the market is skittish, like a nervous colt, dancing this way,then that,on corporate governance issues, credit squeeze, drying up of inflows, pending elections, and highly leveraged balance sheets. It is discounting all news,even positive news,about NBFCs’ after the debacles in DHFL & ILF&S. Even the recovery in the Essel Group of companies,is not seen to be a sustained one,going by some of the group companies share prices’,falling like nine-pins.
And yet,we cannot discard all methods of valuation,even those of revered stock gurus ,WB,Peter Lynch etc, since going by whatever works for the market, is laying the seeds of chaos. If there is madness in the market today,there may be some method to this puzzling mayhem,and we need to put our collective heads together to stay afloat.
1 Like
Sorry for my funny anecdote below, but I think this is relevant as per my stock market experience. So, take it if you feel useful, else ignore it. I have already written my learnings in earlier posts.
Now, the story: (Don’t look for loopholes in the story, I’m trying to drive a point home).
There are 2 persons watching an oncoming train from a far distance and are looking to board the train. Both are unable to judge the velocity of the train.
The first person says, since I’m unsure of the velocity, I will stand on the platform and I will board after making sure that the train in travelling at only 10 kmph or if it stops. If it is travelling way too fast, I will give it a miss.
The second one says, no matter the velocity of the train, I will stand as close to the tracks not to miss boarding. If it’s 10 kmph I will be OK and if it’s 100 kmph, I will then try my best to run away (but there are chances of being badly injured and not in a position to even board the next train).
I will rather be the first person. That is my experience. I respect the person 2 but I cannot be him. My temperament does not allow it.
In stock markets, the survival is important, the upswing will amply take care of you. We should always look for ways to not lose money, the ways to make money comes next. Capital protection precedes capital appreciation.
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As usual,your convictions about the market are strongly held,since you rightly state that markets do not follow rules of logic,else the computer wizards will crack the formula,if at all there is any formula.And your point that Capital Preservation scores over Capital Appreciation, is a generally sound policy.
But we need to be risk takers also,to clock worthwhile returns. After all, ships are not built to cling to safe harbors,but to brave the risky seas,and to bring home treasures from uncharted waters. None the less,point made and taken.
and @homemaker,
your advice to exit from risky ventures,esp when the news flow about regulatory action may or may not snowball into a full blown scam, is laudable,and waiting on the sidelines,until a clearer picture emerges, cannot be faulted per se. But timing the re-entry is tricky, since one has to be extremely quick on the first sign of clearance from the agencies.But then who said that making money on the bourses was easy ?
and @Divyanshu_Bagga
your point about combining info about regulatory action,with other straws in the background noise, esp the level of NPAs,is again good learning for me. But about inheriting PSU culture, in the case cited by you, we need to be cautious not to throw the baby out with the bathwater,since PSU and sarkari culture also sometimes produces “Maharatnas”,though they may not catch the share market fancy. But yes, it can be treated as a red flag,until the subsequent financial performance and adherence to good corporate governance proves otherwise.
Good learning for me,from these posts on this thread, about how to sift the significant and the meaningful,from the transitory and the ever-present background noise,at any given point of time.
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Glad that you appreciate our posts.
Yes, I may be missing few opportunities by ignoring everything related to PSU. I see it as a choice between missing out some multibagger vs avoiding investment blunders, and I will always choose the latter even at the cost of former. Maybe I am too conservative with risk, but in my experience, upside takes care of itself. You just have to stay fully invested during bull markets to rack up decent returns, but the real test of our investing skills is in retaining those returns during sideways market like present. I fully agree with @richdreamz, capital preservation precedes capital appreciation.
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I am tempted to add a car analogy. On Indian roads, we see ubiquitous hatchbacks like Swift, primarily carrying small families, then we have the commercial people movers like the Innova, the overloaded trucks struggling on inclines with their weak engines, tiny commercial vehicles like the piaggio apé with zero safety built in trying to ride the fast lane, two-wheelers with riders sometimes without helmets, then there are the bimmers and porsches - all vying for the same space - all going from point A to point B.
Not everyone is going to same points A and B though they might be sharing the same stretch of road at the same point of time. Not everyone will reach there in the same time even if their destinations are same, if the vehicles they ride in are different. Not all vehicles are built the same as they have varying engine capacities, sheet metal thickness, tuning, transmission, tyres, brakes and of course, safety - some come with 10 airbags, abs, esp with traction control, rollover mitigation while some don’t even have airbags. Some may have airbags but the driver may not understand the relationship between seatbelts and airbags. 140 kmph on a porsche is not the same as 140 kmph on a swift is not the same as 140 kmph on a santro when it comes to safety. It is completely another matter if the speed limit of the stretch is 80 kmph.
A great many fast cars may do point A to point B a whole 20-30% quicker without assuming too much risk. An average speed of 100 kmph vs 60 kmph may not completely indicate risk borne where sometimes the latter may have been more risky. It may depend on time of day, stretch of road, other occupants in the car and of course the kind of car. There are cases of bimmers split in half after a crash driving at 200 kmph as there are cases of people with all safety built in where the driver wasn’t even wearing seatbelts. You see where I am going with this? Risk is very nuanced and highly subjective and depends on a plethora of parameters. Not countering or being flippant about risk here but emphasising that understanding risk is as important as avoiding risk.
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Absolutely, I too was trying to drive the same point but fell short of it as I did not want to prolong this train thing too far.
I’m 100% invested and in the stocks which chug along without assuming too much risk.
For example, H*** Bank gave much better risk adjusted returns than most other high beta stocks. So, instead of investing in a D***, Y** etc, why do not be better invested in high quality and have better sleep at nights?
In fact, people always chase high beta stocks but long term wealth is created in low beta stocks, contrary to most market participants thinking. Higher risk is NOT equal to higher returns, with rare exceptions.
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Sorry, but no stock specific queries please as too many things can go wrong and I change my opinion and may not write here before I act, so, my conscious does not allow me to do so. Generally, be in high growth quality and stay invested for long term and read books, learn from mistakes and move on.
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Interesting story and right behavior too. In real life however, there is always a girl watching that someone with higher adrenalin wants to impress. ( Girl here stands for peer-pressure, not literally). Someone less experienced in the train game can easily yield to the temptation and in fact when i read the anecdote above, I was reminded of this famous scene:
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Again, Sorry, I’m not particularly being modest about myself in my below write up as this post is only intended for newbie investors and not seniors.
A decade back when I was buying junk stocks and getting screwed up, I did not learn and I again sold family gold and again bought junk stocks. This was when market was falling from 2007 top and serendipity has it that I just joined employment after graduation. I was ploughing my monthly salary into pure worthless stocks. The only good thing was I have just started earning and not doing these mistakes at 40 years age and with huge corpus.
Only when the stocks kept falling and falling I thought I was wrong but the damage was already done. But I took courage and one day sold everything. I read books. So many books for the next 2 years. I used to google, “best investment books” and just make a list and read. After a year I was short of books when I type the same search string.
So, I started reading accounting books. I remember I typed, “Chartered Accountant Syllabus books” and read those books. This because, I thought “Surplus & Reserves” line item in Balance sheet is the “money in hand” with the company and so I thought companies are cheap. But, I thought something is wrong and wanted to understand this line item and others. I know, I was very naive and idiot to not even know this. But if I did not take those steps that day, today I would not have been in this position. I think I read most of the entire CA course books.
By 2015, that is in 7 years, I have stopped reading books because the incremental knowledge is not directly useful in picking stocks. Now mostly I read behavioural finance, technical analysis books. I have built up decent technical analysis knowledge and this is helping in my fundamental journey. I strongly believe technical analysis is required but not mandatory in this age of algo trading etc.
So, start reading and learning instead of asking senior boarders like @hitesh2710 which stocks to buy directly. Of course, as Hitesh is a gem of a person and knowledgeable, you can reach him for generic doubts, broad analysis etc. etc. In 10 years from now, I do not know what can stop you from approaching financial freedom status. But, are you guys ready for that 10 years hard work?
Past 3 years, I have done mistakes despite such theoretical knowledge and is par for the course and this investing journey is such a leveller and humbling experience and always is work in progress journey. The key is to exit as soon as you learn you made a mistake instead of clinging on to it on HOPE. Hope is the four letter dirty word in investing.
Anyway, all the best newbies. Until you are confident of your knowledge, park money in a mutual fund. (I’m not related to MF industry). I act solely on my brain’s insistence and nothing else.
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Hi @richdreamz . I agree. It would be better to exit on mistake ( or when the thesis is no longer valid). However, the main challenge is to find an alternate company to invest in. ( especially in the current market where nothing is cheap).
When you sell something, do you invest the sale proceeds right away or move to debt/cash?. You can ignore if its personal.
That was nicely written…what’s your thought on HFC’s going forward…all this ILFS and DHFL issues which we know have dented investors confidence and we can see the borrowing costs in elevated range…HDFC Keki mistry says they never faced liquidity issues…Indiabulls Housing posted not that great results today…Pls advise
P.S Have positions in Indiabulls Housing and PEL…existed DHFL will losses
I know 2-3 persons who had loan approval letters from IBHF but the disbursement was not done in last month! I searched on Twitter “India bulls Housing loan” , found many guys tweeting to them about non disbursal .
Still numbers look great , am I missing something ?
Some more learnings (from other’s experiences and my observations):
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If you are going to panic, panic early, particularly in junk stocks/stocks where the corporate governance is not proven.
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When you are drowning do not take others with you. Please have the humility of an early learner and do not preach with so much confidence and authority that other new comers and gullible ones drown with you.
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Analysing stock as if you are preparing for a doctoral thesis is not necessary while it may help. Apply some common sense and logic as well. Investing is much more art than science.
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If you average after a stock fell 50% and continues down drift, then the joke is on you.
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For junk stocks, all that that can go wrong goes wrong and for quality stocks all that good can happen happens BECAUSE running a business is much more difficult than populating an excel with numbers, formulae and bingo. This applies to analysts as well as most of them lag market consensus by a long shot.
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That is why pay a “bit” premium for quality companies with high RoE/RoCE etc. for a decade or more. This invisible premium will exist as long as the world has both honest people and cheaters.
Enough rant from me for sometime, see you all after a break. Look for compounders.
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In a quick read and scan of the above, I feel that we are taking ‘investing’ and making it ‘like horse racing’ where quick or quicker decisions are necessary. Investments and Investing should be closer to buying Real Estate and selling from any point of the cycle that one purchased (based on the best analysis), to the next cycle high when it is time to sell.
Investing is ‘participating in a business’. If the business knew the road ahead and it was completely paved with no rain, snow, rocks, mud-slides, it would not take that road. But, NO BUSINESS does know that. Hence, a correction will happen, lower low will happen, higher high will happen, demand and supply will chainge, and all of the wisdom of Buffet and Charlie goes out the window for them and for us. Hence, TIME has to be given to heal, enjoy and smell the gunk / roses. Sometimes, the real estate goes down the Dharavi road or the state of South side of Chicago, and your money goes into a Long Term Fixed Deposit. So, what? Wait. Hold. Don’t be trigger happy just because we have a quick / fast internet connection.
Holding RIL when it was flat or even today holding RCOM may not be that smart or stupid. Hold off and see what happens. Jio is winning today and RCOM is losing, but both came from the same parent and the same money. See what happens. Smart or Stupid? I even don’t know even though I am in the Comm Tech business and holding both, but the winning in RIL paid for RCOM already a LONG TIME ago. RCOM about to turn to dust. Don’t comment on RCOM or RIL since it is not a Reliance thread or Moderator will come down on us. Point is, there will be winners loser and sideway players like a Cricket team. Winning each time is not written in stone. Winning Long Term by generating wealth is the objective…
KKP
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Well, I thought I would pen some of my thoughts since we have hit rough patch before we see a lot of greenery. Again, this is from my personal experience and the post is intended for newbies.
I have gone through my posts above and I stick to what I have written despite some commenting on how expensive the valuations are etc. This is because, the proof of what I wrote is in my portfolio performance. Despite such excruciating corrections from 2018 Feb, the so called expensive stocks quote either around those prices or above. None have destroyed value.
However, few value stocks have caused immense pain by correcting more than 50% from the prices they quoted at the beginning of this bear market (Feb, 2018 as per me).
The best financial metric while analysing a company is not “Return on Capital Employed by the company” but “Return of Capital employed by you”.
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Yes, we will see Euphoria again, Our collective efforts to tackle a problem get better as we progress as a race. Covid-19 is no different, could be a larger problem than what we have faced for some time.
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But for us to enjoy the fruits of that, we need to survive in the markets and to survive, we need to think different.
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Mark your portfolio down by 30% from today’s close and if you think you cannot live through that, it perhaps may be the time to sell your PF to your comfortable levels and hold cash and re-deploy once you re-gain confidence, but at that time the prices may not be attractive because, the one who held through the rough patch has obviously taken more risk and so he should be rewarded with higher stock prices, right?
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Buy businesses that are efficiently managed and grow with time productively, ethically. Such businesses will NOT be available at a TTM PE of 20. The faster and sustainable the growth is, the higher the PE.
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Buy businesses where you can trust the promoter, manager and such person who portrays the correct picture of the business and does not show a rosy picture always.
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Sell your junk, penny, bought on others advise, hope stocks, if any, indiscriminately and either move to cash or to quality stocks.
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Please do an honest assessment of how good you are at this direct stock investing and if found lacking, invest in mutual funds of a reputed fund house (no self interest).
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Do NOT believe and invest in someone who analyses using complex excel calculations, talks a lot of value investing jargons, declares top notch quality stocks as expensive by 100% but instead buys stocks of worthless junk quoting his excel sheet proficiency and stating his academic excellency. I’m not painting every erudite person as same, but be aware. Look at the performance of the stocks such persons hold and decide for yourself.
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Quality stocks may take your time but gives back money but Junk stocks take your time and money and gives back pain.
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Of course, there are quality stocks in small and micro caps and will definitely give multibagger returns, but the probability of finding one is very low and even lower is holding onto it during the next correction. May be you can limit your PF allocation to some extent in your high conviction small caps to take advantage of this bear market prices.
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Give time to your quality stocks to compound.
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Do not repeat the mistakes again and again. This time it won’t be different otherwise, everyone would be rich through stocks.
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Differentiating the stocks which are really expensive and the ones which are optically expensive is an art! There are many factors involved in this and if you are not in markets for at least 5-7 years, it may prove to be difficult. It took me so long to realise this. Of course, you may be smarter, but be sure of your smartness and an MBA / Engineering from a top college is unfortunately not a good indicator of smartness in stock market.
I will keep adding here for the next few days, if I have missed any.
Edit 1:
- Some Ace investor or institution buying/selling a stock should absolutely NOT mean anything to you. It should not either be negative or positive.
You should take action ONLY
a) if there is a change in your thesis in business fundamentals, corporate governance, growth projections or
b) you got a better opportunity which should outperform the current stock by a mile
c) Align the portfolio allocation
d) Of course, you need money
- NO matter how bullish you are on a sector/stock, you must NOT go overboard on the allocation. Portfolio allocation precedes return expectations. Things outside our or management hands do happen and you may lose money heavily, sometimes with no exit. Have a process in place and stick to it, no matter what. In short term, you may underperform but in long term that would be a wise decision to take.
EDIT 2:
I will write about “Valuations during extremes vs. Sentiment vs growth expectations”.
People often have views that are north and south pole, so if you do not agree with me, that’s fine, there are more pressing things to bother about than bicker.
Valuations during extremes:
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If a company produces growth north of 30% for 2 years, “market” generally extrapolates that growth till eternity and give PE accordingly. Specifically here, “market” refers to ‘amateur’ investors, technical traders both novice and experienced that belong to pattern followers, breakout traders, momentum traders. I believe a congregation of these “market” participants create tops.
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In the due process, the experienced and long term investors who know the growth characteristics of the company keep exiting. People refer to them as “smart money” and if conspiracy is needed, call them as “operators”. There may be manipulation in penny stocks but in widely followed index stocks, the scope is much lesser.
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During bottoms, almost similar things happen where market extrapolates no or de-growth well into the future and give bottom rock valuations.
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Since business cycles repeat often, it makes immense sense to go back in time and check the valuations accorded by the company during extremes and take action accordingly. Of course, if someone is holding for more than 10 years, these cycles smoothen out, but holding and sleeping is possible ONLY in a handful of companies and sectors. Typically, high quality consumers fall into this.
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So, while entering in a stock, it may makes sense to understand where you stand with respect to valuations vs. growth for that stock and be ready for PE derating or rerating and have return expectations accordingly.
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Tops are quickly formed compared to bottoms because “selling” does not need money commitment, while buying needs money commitment, so it takes time. Also, logically, growth falling down is quite quicker than company gathering itself, change strategy and then get ready for growth again! People also want to see proof before committing large amount of money.
I have never given any quick money making tips but as an exception here is THAT ONE TIP for those who are interested to enjoy the next bull run - SOCIAL DISTANCING. Everything else will fall into place with time.
Edit 3:
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It is outright preposterous to venture into small/micro caps when large caps are available at such valuations.
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There is no doubt that megabaggers would be born out of this correction, however, the chances of finding them and sticking through them is minuscule and in the process the capital would be at stake, so allocate only a certain portion of your portfolio to such companies and not fully allocate.
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One who has seen multiple such cycles obviously can do over allocate but for some one just starting out, the best bet is to pick stocks from NIFTY and NIFTY Junior set of stocks or even a low cost INDEX fund is the best option.
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When the length of closure of businesses is not visible right now, there would be multiple corrections, re-tests of index support levels. The stocks whose earnings are severely dented would slice through past support levels easily. If this is a one month event, the situation would be different, of course.
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STAY AWAY from stocks with high debt levels, Cyclicals unless you have deep insight, questionable corporate governance levels, negative cash flow companies who are buying revenue with credit, they will find it hard to sustain and concede market share. STICK with leaders ONLY.
Edit 4:
Disclosure: I have raised substantial cash by selling my existing holdings in the current rally of Nifty until 9000.
My Reasoning:
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The lockdown has changed my thinking dramatically. The extension of lockdown IF it comes about will cost the economy dearly. Even if it does not come about, I cannot fathom a quick recovery as the bruises of the virus may take time to heal and for consumer sentiment to come back.
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The fiscal space is very narrow compared to 2008 when the ground Indian economy was almost business as usual. If fiscal support is done through money printing, this is inflationary and to counter this the central bank cannot even increase rates given the state of economy and small businesses cannot take the cost of capital increase.
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Technically, we broke the 2009 trend line and as a believer of technicals, the reasons come later and price action typically shows the way first. The targets of the broken channel are dire!
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I do not want to depend on miracles but my thought process want to guide me. If I’m proved wrong, I will get back at higher prices because in such a case we may have a lot more upside!
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Even when I get back in, I will buy only leaders at a premium valuation and not laggards at attractive valuations. It helped me in the past cycle to retain most of the profits.
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If growth in earnings does not come, any number of auxiliary steps by government and RBI does not help much.
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It is very unfortunate that equity has not really given the RISK ADJUSTED returns for Indian investors, however, I still believe the current downturn will sow the seeds of a very prolonged bull market. The timing of which I cannot predict. Let the data decide that first, we will have a lot of time to accumulate.
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Valuations are a function of liquidity ALSO apart from fine fundamentals. If the western markets are in the throngs of virus, I personally cannot see money chasing stocks so quickly and bid the valuations.
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Thanks for @homemaker for the mention!
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Asset Allocation is #1. Portfolio Allocation is #2. Time in the Market #3. Patience #4. And, finally ensuring that we have invested in a business and learn the macro cycles is #5.
If we all ensure that we follow some of these paradigms that our Seniors are using, or their Seniors used, we will have good portfolios that will go with the economic and earning gyrations, and yet, make money at the end of 5, 10, 15 and 20 years. None of us should be in the markets for 1 to 5 years, unless we are close to retirement and cashing out.
KKP
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In this post I will open up more than usual and also more critical (excuse me for this) in the hope that my experience may help some new investors and these are the exact gloomy, apocalypse times where long term portfolios are built for at least 5 years and importantly with an assumption that prices will still fall from here and remain muted for 1 year at least. The returns thereafter will be in abundance and quick. The key here is to not sell out after a quick bounce but hold patiently. Sure, there will be more excruciating corrections during which times, your OWN conviction will help you from selling at the wrong time!
My portfolio has seen max drawdown of 36.5% from top which corresponded to NIFTY levels of 7500 more or less. My portfolio made the top in August, 2018. Though the broader indices started falling from Feb 2018, most of the stocks I was holding fell in Feb 2018 but went on to make much higher tops later in August 2018. Currently, the PF is down 21% from the same top. I have done a bit of trading during this period which could have added about 5% of the portfolio, at max. Remember, I’m a full time investor who sell my stocks to pay for my bills. But, compared to Feb 2018 levels from where the broader market correction started, my PF is at those levels, Zero drawdown.
Max drawdown of a single stock was 55% (You can make out the stock name downline this post) and is still 50% down from top.
Max PF drawdown of 36.5% and max single stock drawdown of 55% taught the importance of 2 things, which I will talk about mostly in this post.
- Importance of having quality portfolio stocks.
- Portfolio allocation, diversification while still being concentrated.
Quality stocks:
This is more of an art than science. Most of the stocks I own, if not all are very highly valued on traditional parameters like PE ratio, EV/EBIDTA, Market cap/Sales etc. But, I strongly believe that the franchise value, brand value, management integrity, quality of such companies are never spoken about often times.
I have already written enough theory on this, so let me give some examples. None of these are recommendations as I’m NOT a SEBI registered fundoo.
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A Kotak Bank (I own) or HDFC bank (I own) had the same opportunity as a XYZ small private bank which started even before Kotak was started. But the market cap (wealth creation, value creation) by Kotak far excels ANY of these small banks. WHY? The management has painstakingly built a FRANCHISE based on trust, risk management, basic lending principles etc.
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A stock typically consists of FRANCHISE value + Growth Value + Opportunity of growth + premium accorded to management, corporate governance. So, when growth fall temporarily, the stock price of a strong franchise does not fall 80% because franchise value etc. come into play. The stronger the franchise the better. Better part of the stock fall is due to the growth component. The stock lands at a certain price where people will find value and then picks up steam when the visibility on the growth increases. You need to have the patience until the growth visibility is back. It is during these consolidation phases people give up on patience and move out to another stock where they eventually lose more money. However, for stocks will no such franchise, management, stocks will see much lower levels and eventually perish. This building of lasting organisations is not easy, otherwise, we would have got 100 Kotak banks by now!
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Well, another example? Page Industries (I own). Some have advocated Lux and even ABFRL based on valuations etc. but the franchise created by Page is simply insurmountable. This has been discussed in Page thread multiple times. Page is still around the Feb 2018 levels. Sure it fell 50% from top, BUT it unnecessarily doubled in 6 months from Feb 2018 till August 2018 and it only gave up the froth. However, Lux is half of the levels it was on Feb, 2018. Look at ABFRL. They were simply buying sales by undue credit to retailers, distributors etc. Rampant disregard to simple business rules like cashflow etc.
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But Page stuck to its principles and used this time to improve its operations, IT, supply chain, ERP implementation, invested in building Kids franchise, Athleisure etc. which will help them now, The lowest TTM PE Page traded so far in the last 2 years is around 45-50 times and the highest PE its competitors traded is around 30. Research, why is this so? Dig its past results. See the RoE, RoCE, past sales growth, cashflows, working capital improvements, dividend payouts etc. Even after such broad market sell offs, pandemic panics, growth blues, why some stocks like Page (I own), HUL (I own), Asian Paints (I own), Dmart (I own) trade at such valuations? If the business environment deteriorates further drastically, surely, Page will fall 30% from here, but its competitors will be wiped out and stock prices collapse. And, when the environment turns favourable, who will be alive to make business? Yes, it will take time, you will see drawdowns in stock price etc., but who said investing is easy?
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There are already so many variables involved in running a business already, so why take chance with promoters who fleece minority shareholders. A cheater never changes, mostly. Sure they may change, but why take chances when you have other options?
Sure, there are ‘n’ number of ways to earn money in stock market, buying quality and twiddling thumbs or buying turnarounds in anticipation of turnarounds, buying in anticipation of PE re-rating etc. but there is only one best way of losing money, buying low quality businesses like Heritage, Parag and imagining it is value investing. Despite food related companies making money in these times, why are these companies failing and so stock prices falling? It is all about CASH. If all your money is stuck in working capital or money is being diverted or profits are not being converted to cash, sales are being done on credit only, then the business is not as strong as you think your excel sheets are screaming at you.
Some of my errors of commission:
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Symphony: I have valued it equivalent to a normal consumer company disregarding the impact monsoons can have on the business. I booked big loss and moved on. Lesson learnt. Surely, it may rise again like phoenix, but I wanted to minimise the variables in the businesses I hold.
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Eicher: I bought it when the valuations are of consumer while the business is of a cyclical. Franchise value is there but the growth is not secular but cyclical. Lesson learnt. I have bought it again because I find the valuations compelling. The pendulum has swung this side now. Disclaimer: I have re-entered Eicher around recent lows.
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Thangamayil: The only time in my entire investing life, I fell for deep low valuations. The franchise is not as strong, the growth would now stop and it has high debt which gives less chance of survival if the business conditions last like this for long time. Sure, it may turn multibagger, but I booked loss and lesson learnt.
Some of my errors of omission:
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Bajaj Finance: I bought this at 800 during demonitization lows and sold off quickly with no profit. I was scared of its consumer loan book. Chola almost went under during 2008 because of its consumer book. Here, the bajaj finance management proved me wrong and the dramatic re-rating of valuations had me off the hook. My own fears have kept me away from this stock. One should be OK to buy only when most of the odds are in favour. Else, let it go. Now that it fell so much, this may give me another chance to buy but I already have enough allocation to finance, so I may not buy. Never say never.
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Nestle India: It has all the ingredients of a company I typically invest into. But I have thought of it as a “maggi” company and did not see the fantastic diversification and thoroughly successful at it. My fault. I will buy when some bad news comes and it falls again! Of course, I will not wait for it to fall till 5000, which is impractical.
You should be very conscious of the valuations vs. growth but never be impractical on valuations. A value investor in this forum finds value in a stock like Heritage etc at 700 and calls it value investing while disregards a company like Page valuing it at 7000. Baffles me.
What YOU think as VALUE, even the MARKET should think of it as value too. Only then, you will get your price over a period of time, else, it is endless wait. You should then realise that there is a mistake in your model and be modest and humility enough to learn from seniors like @hitesh2710. It is better to buy a Kotak and twiddle your thumbs for 10 years and see meaningful returns than buy a Heritage at a value buy of 700 and see it fall 70% and still say market is wrong!
I also do not sell any advisory services, PMS etc., so I do not have to be diplomatic in order to attract subscriptions. I will call a spade a spade even if that spade kills me. Fortunately, I’m also not a suit, boot excel based value investor despite being graduated from top engineering college. I was quick enough to learn that the stuff I learned there is of no use in stock markets but are of more value in corporate life.
These are my thoughts that helped me make money. So, I have put across. You may not agree with this and also make more money than mine.
As I indicated in my earlier post, I had moved to cash in April 1st week, but now I’m fully invested because of change in my opinion. Financials (top 2 banks only) form a larger portfolio than before bought at current prices and I’m willing to wait and also take a 30% hit on my portfolio. Some of my consumer stocks may also stagnate here, the risk which I’m willing to take because I wait endlessly on strong franchises. Example being, Page is a 6 bagger for me despite it falling 50% from top. The top is undeservingly high though. Despite being a hold and sit investor, I have gone through a lot of mind churning thoughts in order to assess how this COVID 19 will impact businesses.
Initially, I thought this is a major change and even stock price falls seemed to agree with me. But, now, I believe, a 2 year growth slowdown should not take out much from a 50 year business franchise. Even a DCF formula accords so much value to “terminal” growth. This is the first time ever I moved to cash and again moved back in with a little churning in my portfolio, otherwise I’m 100% invested.
If I have inadvertently hurt any feelings of the members, excuse me!
**Side thoughts, particularly for full time investors 
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See, if you can learn a new hobby, or improve upon an existing one. This may be a longer time correction depending on how consumer behaves post lockdown. Hope things may be back sooner then the prices will also move faster to mean valuations!
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Spend more family time, reduce quarrels with them, be more considerate, patience.
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Time to shed weight, if you are over weight?
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Start eating healthy, if not already?
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Spend money wisely, now that you know what you “really” need.
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Reduce anger, improve health parameters. Work on cholesterol, etc?
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Start reading books, analyse things, introspect. Deep dive. Master valuations game and let me know too!
All the best guys!
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