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Vivek Sukhani
Senior Member
Joined: 23/Jul/2006
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Posts: 6675
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   Posted: 25/Jan/2009 at 3:13pm |
But even though we have made wonderful returns in the market, but we have got to remember we were helped very much by the circumstances. I think it was more of God's grace than anything else.
I have seen 3 kind of people in the market:
1.People who make so much return during good times that they perfectly insulate and prepare themselves financially for the future, even though they lose heavily after the good times are over( as they dont make switches between asset classes)......
2.People who make decent returns and make good switches to other investment avenues, and prepare themselves for the future.
3.People who make such horrible investments during good times that they lose whatever little they have earned in the good times and also ruin themselves totally for their present and the future.
Its those who are really stuck who need to show tenancity and strength of rational thinking and character to get back running. the first 2 categories, will survive and its the third group of people, for whom survival is at stake.
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Jai Guru!!!
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stockaddict
Senior Member
Joined: 18/Jul/2007
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Posts: 263
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Posted: 25/Jan/2009 at 1:03am |
I agree with Vivek that buying cheap is the only sustainable way to earn profit for a long term investor, though it should be combined with the principle of picking scalable earnings growth stories. We have seen that even the companies who were supposed to have scalable growth stories too have faltered or are facing difficulties in recent times, therefore if one pays too high a price for those in the hope that 'a few quarters hence the stock will look cheap' and justifying by rationalising ' it has always been expensive stock' one may face some unpleasent surprise. Buying low gives you that elusive 'Margin of safety'. There may be an individual success story built on a careful risk taking strategy but it may be difficult to replicate widely.(Even bulk of Basant's returns are from Pantaloon and trent, both bought when they were value)
As Graham has defined so succinctly "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative."
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ananthap
Newbie
Joined: 17/Jan/2009
Location: India
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Posts: 5
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Posted: 25/Jan/2009 at 6:10am |
I am new to investing and found this discussion very interesting.
I would like to know more about how to pick stocks and technical analysis.
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Sincerely,
Anantha
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HallaBol
Senior Member
Joined: 26/Mar/2008
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Posts: 186
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Posted: 25/Jan/2009 at 7:37am |
Originally posted by stockaddict
I agree with Vivek that buying cheap is the only sustainable way to earn profit for a long term investor, though it should be combined with the principle of picking scalable earnings growth stories. We have seen that even the companies who were supposed to have scalable growth stories too have faltered or are facing difficulties in recent times, therefore if one pays too high a price for those in the hope that 'a few quarters hence the stock will look cheap' and justifying by rationalising ' it has always been expensive stock' one may face some unpleasent surprise. Buying low gives you that elusive 'Margin of safety'. There may be an individual success story built on a careful risk taking strategy but it may be difficult to replicate widely.(Even bulk of Basant's returns are from Pantaloon and trent, both bought when they were value)
As Graham has defined so succinctly "An investment operation is one which, upon thorough analysis, promises safety of principal and a satisfactory return. Operations not meeting these requirements are speculative." |
you have really summed it very well.
There is absolutely no substitute for having a margin of safety.
"Have your purchase price so that even a mediocre sell will give you a return" - Buffet
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The future is never clear, you pay a very high price in the stock market for a cherry consensus. Uncertainty actually is the friend of the buyer of long-term values. - Warren Buffet
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HallaBol
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Joined: 26/Mar/2008
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Posted: 25/Jan/2009 at 10:01am |
Originally posted by arunshah2k
Originally posted by HallaBol
This is great time to load companies with long term earning visibility, which are having near term trouble.
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And doing this, is the biggest challenge. How to identify companies that can turnaround in future, but having lots of issues now? |
One way to look for this is out of favour companies. When companies are out of favour, there will not be any built-in expectations in price. That will give great margin of safety, if things go wrong.
Remember when did RJ bought huge stakes in Titan etc. companies. That time nobody was touching it, it was out of favour, it had no expectations built-in price. Even when Basant bought PRIL, it was not a discovered stock in the market.
Now to the question of whether things will turn around or not, nobody can tell you for sure. Even great investor like Basant went terribly wrong in predicting visible growth for many stocks like PRIL, TV18, Voltas etc. Many of RJ picks did not work for him. RJ still did not lose money in them as he got in at great prices. Always remember that turning around is always a probability than certainty. Only the probability is more or less, but never pay high price for that probability .
Never bank on growth with certainty, have a margin of safety in price if things go wrong. And remember even after having margin of safety, some of picks might not work. Still if 50% of them works, you will make lot of money.
Edited by HallaBol - 25/Jan/2009 at 10:15am
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The future is never clear, you pay a very high price in the stock market for a cherry consensus. Uncertainty actually is the friend of the buyer of long-term values. - Warren Buffet
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aloksahi1971
Senior Member
Joined: 20/Aug/2007
Location: India
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Posts: 390
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Posted: 25/Jan/2009 at 10:29am |
This Idea of buying cheap and selling at a higher level is the easiet form even the local village pansariwala aplies it in his day to day dealings.But as far as stocks go their a host of factors that do effect the price.Say a stock like Mahindra Lifespace.No debt ,Good projects,unending demand but yet it has been beaten down.
Titan Huge inventories some sectors like eye care and percision tools section not performing. Is this inventory caused by slugish sales???
What may seem cheap may not live upto ones expectations.I got into Biocon as Bill Gates predicted Biotech was the future the stock has gone no where in the Bull run and has been slamed in the bear.Yet Kiran Majumdar is a toast of all.
This selling of a scrip at the right time in my view is the ultimate test for some one in the market.The notional gains can be booked and send to safe keeping and a fixedmount to be left in the stocks to be augmented in a fall and reduced in a spike.
I wont lie but I for one was waiting for the Pre Buget in 2008 to sell but as most of you know...................................
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Born To Golf forced to work.
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Vivek Sukhani
Senior Member
Joined: 23/Jul/2006
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Posts: 6675
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Posted: 25/Jan/2009 at 11:13am |
And always understan that the best price to get a stock is at its knock-down value.
And this has to be generally at a very sufficient discount to book value, where its anticipated that the company will be making losses, that there will be hidden liabilities unearted and are likely to become actual liabilities, that the asset values be worth less than what its shown.
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Jai Guru!!!
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HallaBol
Senior Member
Joined: 26/Mar/2008
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Posted: 26/Jan/2009 at 12:16pm |
Originally posted by aloksahi1971
This Idea of buying cheap and selling at a higher level is the easiet form even the local village pansariwala aplies it in his day to day dealings.But as far as stocks go their a host of factors that do effect the price.Say a stock like Mahindra Lifespace.No debt ,Good projects,unending demand but yet it has been beaten down.
Titan Huge inventories some sectors like eye care and percision tools section not performing. Is this inventory caused by slugish sales???
What may seem cheap may not live upto ones expectations.I got into Biocon as Bill Gates predicted Biotech was the future the stock has gone no where in the Bull run and has been slamed in the bear.Yet Kiran Majumdar is a toast of all.
This selling of a scrip at the right time in my view is the ultimate test for some one in the market.The notional gains can be booked and send to safe keeping and a fixedmount to be left in the stocks to be augmented in a fall and reduced in a spike.
I wont lie but I for one was waiting for the Pre Buget in 2008 to sell but as most of you know................................... |
All stocks might not give you returns from beaten down levels. Biocon was one which did not give return. Even if some stocks click, returns will be huge, just like taking a bet on PRIL in 2003.
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The future is never clear, you pay a very high price in the stock market for a cherry consensus. Uncertainty actually is the friend of the buyer of long-term values. - Warren Buffet
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