Saturday, November 15, 2014

The 60:40 Ratio

How important is it to pick the right stock in comparison to bearing the right attitude?

You could have invested in the best companies but without developing the right attitude, you would rarely gain from these stocks. One might end up selling at the wrong time and lose out on all the potential gains. Wonder how many people would have ridden on our stock recommendation CERA when we invested in it at 200 levels? it’s been a multibagger of 8 times. Frankly not too many people made money as most sold in fear, when it at best doubled. On the other-hand people who wanted to be part of a promising sector, a well managed business would have held on to it. I still hold because I consider my self a business man who has invested in a sanitary-ware business, because I am confident that the management of CERA will deliver growth in earnings and I will sell only when one of these changes. Thus I stop seeing stock price movement as a need to buy or sell. For that matter, if I want to start a business in another fledgling sector, I would rather look at an existing franchise rather than build it up grounds up. 

A word about management, they are the people who make it happen. So one needs to be very cautious before trusting your business with them. if you look around in your own place of work, you can see how some people can bring magic to the results, some exclusive set of minds who have ability to execute their plans well and evolve constantly in all conditions. Invest with them. We have examples like Dilip Shanghvi or Sunder Genomal, you will rarely go wrong by trusting in their ability to execute.

When I looked at how people waited for months to get their bullets delivered, I had already missed investing in a great brand, but I caught up later as I saw during my recent long weekend outing, the craze and pride that bikers have for their hobby together with a spendable income. I believed the opportunity for the company was large and they can exhibit consistent growth into the future even with a current market cap of Rs 35,000 crore. The stock market provides a great opportunity to set up your business in no time. What would you do if you were to set up a business? You would study the industry, or follow your domain expertise, talk to people in the industry, verify details and once you are convinced you would make your financial outlay.

Investing in stocks is no different to setting up your business. When you approach stocks with this mindset, it becomes business like investing. What I refer to as building a right attitude. This is far more important than identifying the best stocks. Today we are in a world of information overload, so all data are available. Yet very few make money in stock market, it is because there are no institutions to train on building the right attitude.

This blog in a humble contribution in building the right attitude to investing.

We are still holding on to Our Kiler Stock, it has only doubled 

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