investing is the most profitable form of trading!
it is a myth that you invest in a company.
the reality is that you invest in a management
and
you invest in a business!!!
if the business is bad
even best management can't do anything for long!
for a moment,
let's assume that the business makes business sense.
then, there are 4 types of "managements" available for investing:
1. good management going thru bad times
= this is the best investing bet, a multibagger!
give then time and they will give you a wonderful gift!
e.g. tata motors' journey from 110/stock to 1376/stock
present example = mahindra satyam
2. good manangement going thru good times
= hold on, this is the best momentum play
stay with them till they are around
e.g. hero honda (since inception)
3. bad management going thru good times
= stand near the exit door if you can't avoid the bait!
e.g. suzlon
4. bad management going thru bad time
= stay away!
Showing posts with label Management. Show all posts
Showing posts with label Management. Show all posts
Thursday, December 9, 2010
Sunday, October 10, 2010
Invisible Profit Powers behind winner traders!
Winners in stock market make profits effortlessly.
How?
They have the following invisible profit powers behind them
# Power of Simplicity
No complex analyses, no fancy tools, no smart manouvering....
......just simple method backed with good risk management!
By keeping their heads free of clutter, winner traders have an invisible power pushing them towards profits by not pulling them towards loss!
--------------------
# Power of Method
A trader's no.1 enemy is a professinal and bigger trader!
A trader's no.2 enemy is he himself!!
A method saves you from both!
When you trade with a method, you automatically have an invisible power edging you towards profit!
--------------------
# Power of Failure
Winners love failure!
Firstly, it helps them zero-in on their "holy" method!
Secondly, failure helps them further improve and master their "holy" method!
Both ways, failure acts as an invisibile power that pushes winners near profit!
For losers, failure is like a hound standing at the gate of profit which scares them away everytime!
--------------------
# Power of Focus
Winner traders know that they have limited time and money and stress-and-loss-bearing ability!
They know they can't "try out" and "master" too many methods!
They focus on what works and not on fighting with what doesn't!
They know that money doesn't make any fuss about the method used to fish it out!!!
(There are no awards for knowing more methods. There are punishments, though!)
Focus is the power that invisibly pushes winners towards profit.
--------------------
# Power of Uniqueness
Winners are not copy-cats.
They know that they are different.
They know their limitations.
They give themselves the luxury to use their own improvised method.
Your own method may not be a Nobel prize winning one but it has the invisible power to make you profitable!
How?
They have the following invisible profit powers behind them
# Power of Simplicity
No complex analyses, no fancy tools, no smart manouvering....
......just simple method backed with good risk management!
By keeping their heads free of clutter, winner traders have an invisible power pushing them towards profits by not pulling them towards loss!
--------------------
# Power of Method
A trader's no.1 enemy is a professinal and bigger trader!
A trader's no.2 enemy is he himself!!
A method saves you from both!
When you trade with a method, you automatically have an invisible power edging you towards profit!
--------------------
# Power of Failure
Winners love failure!
Firstly, it helps them zero-in on their "holy" method!
Secondly, failure helps them further improve and master their "holy" method!
Both ways, failure acts as an invisibile power that pushes winners near profit!
For losers, failure is like a hound standing at the gate of profit which scares them away everytime!
--------------------
# Power of Focus
Winner traders know that they have limited time and money and stress-and-loss-bearing ability!
They know they can't "try out" and "master" too many methods!
They focus on what works and not on fighting with what doesn't!
They know that money doesn't make any fuss about the method used to fish it out!!!
(There are no awards for knowing more methods. There are punishments, though!)
Focus is the power that invisibly pushes winners towards profit.
--------------------
# Power of Uniqueness
Winners are not copy-cats.
They know that they are different.
They know their limitations.
They give themselves the luxury to use their own improvised method.
Your own method may not be a Nobel prize winning one but it has the invisible power to make you profitable!
Saturday, October 9, 2010
11 Bitter Pills of Trading!
Trading Bitter Pill #1:
Either you are among the winners or among the losers.
If you have any misconception, clear it first!
-----------------------
Trading Bitter Pill #2:
Now when you have accepted that you are among the losers decide who is responsible for this situation!
If you think the responsibility lies with the market forces or bad luck or slow internet connection or bad advice of broker etc then there is little scope for you ahead.
-----------------------
Trading Bitter Pill #3:
Now when you have acknowledged that you yourself are responsible for your being in the losers' herd and not in the winners' group, find out what is not working!
(since you are losing repeatedly, majority of the things you are doing and the way you are doing ARE NOT working)
-----------------------
Trading Bitter Pill #4:
Now when you know what worked and what didn't in your past trades
....start rebuilding your trading career around what worked!
Shamelessly keep repeating the trick that works!
Exploit and milk it to the max!
Trading is about reward, not fair-play award.
A trick that works is worth 10 that promise to work.
Winners don't know more tricks.
Winners know more effective tricks!
-----------------------
Trading Bitter Pill #5:
Courage is the fear whose prayer has been said!
Trade is the risk whose homework has been done!
There can be risks without wins
but there are no wins without risk!
-----------------------
Trading Bitter Pill #6:
Knowledge is not money.
Knowledge in action is!
-----------------------
Trading Bitter Pill #7:
Nobody knows the answers in stockmarket...only opinions!
Ask keeping this in mind!
-----------------------
Trading Bitter Pill #8:
Trading losses have nothing to do with being unlucky for trading.
Its all a method, psychology and risk-management issue.
-----------------------
Trading Bitter Pill #9:
Market hits our actions, not us!
Market rewards our actions, not us!
-----------------------
Trading Bitter Pill #10:
Forgive your mistakes, remember the lesson, stand up and move forward!
Every winner has a history!
-----------------------
Trading Bitter Pill #11:
If you are not clear and specific about what and how much and by when you want from the market, you won't get it!
Also, be clear about what you are willing to give in return?
Either you are among the winners or among the losers.
If you have any misconception, clear it first!
-----------------------
Trading Bitter Pill #2:
Now when you have accepted that you are among the losers decide who is responsible for this situation!
If you think the responsibility lies with the market forces or bad luck or slow internet connection or bad advice of broker etc then there is little scope for you ahead.
-----------------------
Trading Bitter Pill #3:
Now when you have acknowledged that you yourself are responsible for your being in the losers' herd and not in the winners' group, find out what is not working!
(since you are losing repeatedly, majority of the things you are doing and the way you are doing ARE NOT working)
-----------------------
Trading Bitter Pill #4:
Now when you know what worked and what didn't in your past trades
....start rebuilding your trading career around what worked!
Shamelessly keep repeating the trick that works!
Exploit and milk it to the max!
Trading is about reward, not fair-play award.
A trick that works is worth 10 that promise to work.
Winners don't know more tricks.
Winners know more effective tricks!
-----------------------
Trading Bitter Pill #5:
Courage is the fear whose prayer has been said!
Trade is the risk whose homework has been done!
There can be risks without wins
but there are no wins without risk!
-----------------------
Trading Bitter Pill #6:
Knowledge is not money.
Knowledge in action is!
-----------------------
Trading Bitter Pill #7:
Nobody knows the answers in stockmarket...only opinions!
Ask keeping this in mind!
-----------------------
Trading Bitter Pill #8:
Trading losses have nothing to do with being unlucky for trading.
Its all a method, psychology and risk-management issue.
-----------------------
Trading Bitter Pill #9:
Market hits our actions, not us!
Market rewards our actions, not us!
-----------------------
Trading Bitter Pill #10:
Forgive your mistakes, remember the lesson, stand up and move forward!
Every winner has a history!
-----------------------
Trading Bitter Pill #11:
If you are not clear and specific about what and how much and by when you want from the market, you won't get it!
Also, be clear about what you are willing to give in return?
Tuesday, August 24, 2010
Investing without tears!
Yesterday I met the grand old man of stock trading at a club in Shimla.
On finding him alone, I asked whether I could have a cup of coffee with him.
He obliged.
-------------------
"What are you doing these days?", he asked.
"I am itching to get into fundamental side of trading, Sir! Till now I was so focused on technicals that fundamental part got totally ignored. I am trying to make up for that!" I revealed frankly.
"So, how are you entering this sea of fundamentals!", he smiled!
"Well, I have got my hand on a few good books of stock fundamentals. I am burning my midnight oil to get the head and tail of balancesheets and Profit & Loss accounts and ratios....etc." I shared, albeit with a sigh of exhaustion.
He was listening quite attentively but didn't speak.
"It is a big big syllabi and I'm afraid I am already tired!" I admitted.
"But why are you getting into all this junk?" he said.
I was rather shocked at his question.
Everyone knew that this guy was a gem of an investor. His opinion about potential multi-baggers was famous in the Shimla circle.
"Sorry, I didn't get you!", I said.
"I am asking why are you mugging all this financial stuff?", he clarified.
"But why not, uncle!" I got involved!
"Afterall, how can I be a fundamentals-based investor without being a master of all this technical stuff?", I retorted.
"Look, Mr.Singh. You don't have to be an Chartered Accountant or M.Com or MBA (Finance) to be a good fundamental investor.
Rather, the more you entangle yourself in this jargon the more you will be vulnerable to being befooled by the army of financial special-effect experts of the corporate world.
You just can't think of beating them!", he explained.
"To be a good fundamental-investor you need to be good at psychology and common-sense!"
he continued.
"What!", I couldn't help reacting.
"Yes, you heard it right!", he calmed me down.
"All you need to focus on are these two things
1) The future of the business
2) The man behind the controls.
That's all I look for when I commit my money to a stock!"
"Sounds very interesting!" I was surely amused.
"So long as a budding Anand Mahindra or a Rattan Tata or a Sunil Mittal or a Kiran Majumdar or a Y.C.Deveshwar is at the helm of affairs....how can I be worried."
"When I am taking these names I don't mean I invest only in these bluechips or their new ventures.Rather, I have a big chunk of my investment portfolio into small caps and mid caps. And I must share that I regularly keep coming across tomorrow's Ratan Tatas and Anand Mahindras and Mittals..!"
"When I see common-sense business opportunities picked by able unstoppable men, I know I have found my investment opportunity!"
"So, all I am interested to know is
- what's the business opportunity
- who's heading, and
- what's in his head!
..............Period!
why should I bother about the fundamentals when I am sure "my" man-in-charge and his team is competent enough to manage it quite well for me?
His or her track record, the fire in their belly, passion in their body language, promise in their eyes............these all reveal it all!
If the fundamentals are not good, my man (or woman)-friday and his team will set it right for me.
Rather a situation where good team inherits a good business with marred fundamentals is a fantastic investing opportunity as the stock will be available at peanuts!!!
I know I can never be expert enough to be able to sniff-out the rat or cat in a cleverly dressed balancesheet, statements and ratios! So why bang my head into these?
Besides, what's the guarantee that a good balance sheet and P&L account will stay good?
Only a great team headed by a great leader can do that!
So, I should rather put my senses and energies to know about the guy (or guys) at the helm of affairs besides some common-sense gaze into the future of the business!
Once I am sure that the business potential is huge
Once I believe in the ability, integrity and intentions of the captain, I relax and let him and his team sufficient time to deliver results!!!
So, all I do to pick a stock for investment is
- look for emerging business opportunities
- read hell lot of interviews and anecdotes and stories about budding businessmen."
--------------
"I hope I have not bored you dear, you haven't finished your coffee!" he said.
I was awe-struck!
I just got rid of a mountain of books!!!
On finding him alone, I asked whether I could have a cup of coffee with him.
He obliged.
-------------------
"What are you doing these days?", he asked.
"I am itching to get into fundamental side of trading, Sir! Till now I was so focused on technicals that fundamental part got totally ignored. I am trying to make up for that!" I revealed frankly.
"So, how are you entering this sea of fundamentals!", he smiled!
"Well, I have got my hand on a few good books of stock fundamentals. I am burning my midnight oil to get the head and tail of balancesheets and Profit & Loss accounts and ratios....etc." I shared, albeit with a sigh of exhaustion.
He was listening quite attentively but didn't speak.
"It is a big big syllabi and I'm afraid I am already tired!" I admitted.
"But why are you getting into all this junk?" he said.
I was rather shocked at his question.
Everyone knew that this guy was a gem of an investor. His opinion about potential multi-baggers was famous in the Shimla circle.
"Sorry, I didn't get you!", I said.
"I am asking why are you mugging all this financial stuff?", he clarified.
"But why not, uncle!" I got involved!
"Afterall, how can I be a fundamentals-based investor without being a master of all this technical stuff?", I retorted.
"Look, Mr.Singh. You don't have to be an Chartered Accountant or M.Com or MBA (Finance) to be a good fundamental investor.
Rather, the more you entangle yourself in this jargon the more you will be vulnerable to being befooled by the army of financial special-effect experts of the corporate world.
You just can't think of beating them!", he explained.
"To be a good fundamental-investor you need to be good at psychology and common-sense!"
he continued.
"What!", I couldn't help reacting.
"Yes, you heard it right!", he calmed me down.
"All you need to focus on are these two things
1) The future of the business
2) The man behind the controls.
That's all I look for when I commit my money to a stock!"
"Sounds very interesting!" I was surely amused.
"So long as a budding Anand Mahindra or a Rattan Tata or a Sunil Mittal or a Kiran Majumdar or a Y.C.Deveshwar is at the helm of affairs....how can I be worried."
"When I am taking these names I don't mean I invest only in these bluechips or their new ventures.Rather, I have a big chunk of my investment portfolio into small caps and mid caps. And I must share that I regularly keep coming across tomorrow's Ratan Tatas and Anand Mahindras and Mittals..!"
"When I see common-sense business opportunities picked by able unstoppable men, I know I have found my investment opportunity!"
"So, all I am interested to know is
- what's the business opportunity
- who's heading, and
- what's in his head!
..............Period!
why should I bother about the fundamentals when I am sure "my" man-in-charge and his team is competent enough to manage it quite well for me?
His or her track record, the fire in their belly, passion in their body language, promise in their eyes............these all reveal it all!
If the fundamentals are not good, my man (or woman)-friday and his team will set it right for me.
Rather a situation where good team inherits a good business with marred fundamentals is a fantastic investing opportunity as the stock will be available at peanuts!!!
I know I can never be expert enough to be able to sniff-out the rat or cat in a cleverly dressed balancesheet, statements and ratios! So why bang my head into these?
Besides, what's the guarantee that a good balance sheet and P&L account will stay good?
Only a great team headed by a great leader can do that!
So, I should rather put my senses and energies to know about the guy (or guys) at the helm of affairs besides some common-sense gaze into the future of the business!
Once I am sure that the business potential is huge
Once I believe in the ability, integrity and intentions of the captain, I relax and let him and his team sufficient time to deliver results!!!
So, all I do to pick a stock for investment is
- look for emerging business opportunities
- read hell lot of interviews and anecdotes and stories about budding businessmen."
--------------
"I hope I have not bored you dear, you haven't finished your coffee!" he said.
I was awe-struck!
I just got rid of a mountain of books!!!
Wednesday, August 18, 2010
"Dearest Papa!" (Understanding Balancesheet)
This is a letter by a daughter to her Business Tycoon father explaining why she was turning down her marriage engagement with the son of a top-shot business house.
-------------------------------------------------------
Dearest Papa,
This may come as a rude shock to you but I have decided to cancel my engagement with Kartik.
Papa, this is the question of my future.
You had said that I shall have a great future with this family, but when I had a closer look at their Balance Sheet I was shocked to find their true financial status and moral ethics.
I am sharing below my findings from the balance sheet so that you can understand what I am saying!
- short term receivables are very low
- too much of credit is being extended to the supply chain
- NPAs are high
- advance credit retail has been shown to jack up sales figures
- too less cash in hand (how are they managing the payments to suppliers etc.? Employees, Suppliers etc. must be highly dissatisfied!)
- in last year's balance sheet they had too much of cash-in-hand. This shows that either they had no idea of how to deploy the excess cash or they had no plans! All that excessive cash has evaporated from balance sheet this year without any meaningful asset creation this year!
- they are carrying too much of inventory. Their inventory turnover (=sale/avg.inventory) is too low. I am surprised at the inefficiency! They must be paying a lot of interest on this inventory pile! How can they be managing their lives efficiently?
- they have calculated their fixed assets (land holdings, plant, machinery etc.) at market value instead of at cost. they have given highly inflated figures for these not-meant-to-be-sold-till-distress assets. why have they done that? obviously, their actual financial position is not as healthy as they have made out to be - by inflating these non-current assets. Had they used genuine 'at cost' figures for these assets, their net assets would have nose-dived even further!
- they have huge current liabilities. how come they didn't manage their debt?
- their current liabilities are almost equal to their cash flows! As exposed by their quick ratio i.e. (current assets without inventory)/current liabilities, which is less than 1, how are they going to save their company from debt trap? they are likely to default soon on their interest payments. Even if they go for debt restructuring, this will result in decline in their credit-worthiness which will further make debt hard and costlier to come.
- the most shocking thing is that they have almost zero net assets! Their liabilities are almost equal to their assets!
- surprisingly, they have no intellectual property by way of any good brand, patents, trademarks, copyrights, technology, processes, etc.. They have no core strength!
- I have a strong feeling that they have a considerable hidden off-balancesheet debt due to some large capital expenditures
In light of my above findings from their balance sheet, I am really shaken at even the thought of marrying into that family of hollow financials and weak ethics!
I hope my darling papa understands me and allows me to snap this relationship.
Your loving daughter
Chiki
-------------------------------------------------------
Dearest Papa,
This may come as a rude shock to you but I have decided to cancel my engagement with Kartik.
Papa, this is the question of my future.
You had said that I shall have a great future with this family, but when I had a closer look at their Balance Sheet I was shocked to find their true financial status and moral ethics.
I am sharing below my findings from the balance sheet so that you can understand what I am saying!
- short term receivables are very low
- too much of credit is being extended to the supply chain
- NPAs are high
- advance credit retail has been shown to jack up sales figures
- too less cash in hand (how are they managing the payments to suppliers etc.? Employees, Suppliers etc. must be highly dissatisfied!)
- in last year's balance sheet they had too much of cash-in-hand. This shows that either they had no idea of how to deploy the excess cash or they had no plans! All that excessive cash has evaporated from balance sheet this year without any meaningful asset creation this year!
- they are carrying too much of inventory. Their inventory turnover (=sale/avg.inventory) is too low. I am surprised at the inefficiency! They must be paying a lot of interest on this inventory pile! How can they be managing their lives efficiently?
- they have calculated their fixed assets (land holdings, plant, machinery etc.) at market value instead of at cost. they have given highly inflated figures for these not-meant-to-be-sold-till-distress assets. why have they done that? obviously, their actual financial position is not as healthy as they have made out to be - by inflating these non-current assets. Had they used genuine 'at cost' figures for these assets, their net assets would have nose-dived even further!
- they have huge current liabilities. how come they didn't manage their debt?
- their current liabilities are almost equal to their cash flows! As exposed by their quick ratio i.e. (current assets without inventory)/current liabilities, which is less than 1, how are they going to save their company from debt trap? they are likely to default soon on their interest payments. Even if they go for debt restructuring, this will result in decline in their credit-worthiness which will further make debt hard and costlier to come.
- the most shocking thing is that they have almost zero net assets! Their liabilities are almost equal to their assets!
- surprisingly, they have no intellectual property by way of any good brand, patents, trademarks, copyrights, technology, processes, etc.. They have no core strength!
- I have a strong feeling that they have a considerable hidden off-balancesheet debt due to some large capital expenditures
In light of my above findings from their balance sheet, I am really shaken at even the thought of marrying into that family of hollow financials and weak ethics!
I hope my darling papa understands me and allows me to snap this relationship.
Your loving daughter
Chiki
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