Concept of averaging is never a nad idea however you have to 99.9% sure of knowing the things happening in sector, stock. Once invested and have conviction, i just go and do averaging in stocks i have selected in core portfolio, you should be happy as aquisition price go down hence return in investment go up.
I would like to add that I am in the startup phase of my investments - so ones strategies should be aligned to ones experience in the markets. Typically beginners like myself enter the markets with half baked know how and are ignorant about important aspects of investing. To cross the chasm one needs rules that protect you in this phase from too much harm as mistakes are inevitable. One should be flexible and discard notions that don’t work and retain the ones that do.
As one acquires skill to avoid the bad apples , the good apples pile up and then you can breathe a sigh of relief. No seasoned investor I know uses 15% exits - but that’s due to their better abilities at picking winners.
This is one of the. Best article on working capital changes with some practical example
I always study cash flow and working capital changes before investing and this article given me lots of awareness on this topic , read it numerous times
Hope it may be helpful to you also
Yes, looking at WC changes and movements holds a lot of promise as a tool to identify well run cos. Looking at the operating cycles of footwear cos for e.g - one can easily identify the ones facing issues from the ones that aren’t
hi @bheeshma Thanks for the sheet. Shouldn’t we be careful about the companies which operate with the borrowing? The sheet has taken the borrowings into account. If the borrowings are high & cash flows/cash is not present then it should be treated as negative, right?
receivables days is calculated by dividing receivables by sales * 365. since sales also has the profit component of any transaction, it is used as the denominator when calculating “days”. so its like to like.
on the other hand, the denominator for calculating inventory days and payable days is cost of sales (or cost of goods sold) because that is the financial value (cost) incurred to generate that level of inventory and payables.
hence i am not quite clear what you were trying to say when you said it cant be taken from the balance sheet and has to be estimated.
The receivable days as you said is like to like. However, the figure of receivables present on the balance sheet has a profit component. Do let me know if am making a mistake somewhere.
If cash flows are insufficient to cover WC then the co will need to resort to borrowing. If that situation continues for a while then the co will be in a soup else it will need to scale back.
James Simmons - undoubtedly the greatest quantitative (read mathematical) investor of our times
He ends his talk with his 5 guiding principles
- Do something new
- Collaborate with the best people you possibly can
- Be guided by beauty
- Dont give up
- Hope for some good luck
This is a short writeup by a friend of mine on his 3 month learnings on the stock market. He is not the one to dabble in the stock market at 41 but he did and this entertaining account not only contains some good genuine learnings but also is useful for some vicarious experience. Not to mention he is an extremely good writer. For those who want to reach out to him do ping me.
The Lockdown Robinhood.pdf (642.3 KB)
Nice Article He has nicely explained the process, Thanks for sharing