Year 2008 to 2010: As a Student Profile: Trading Analyst
Year 2010 to present: Job Profile: Rating Analyst
Year 2015 to forever: Value Investor
This isn't a journey from being a Trading Analyst to a Rating Analyst, rather a convoluted one
of a trading analyst transforming into a combo of a rating analyst and a value investor. The year 2010
showcased me my latent curiosity towards stock markets, the time when I was
otherwise booked by post-grad books. I
ventured into the arena of lure for stocks, lust for bull market and love of
the money earned through trading. Money though was never the ultimate factor
for my trading quest; it was rather an urge to know more about varied
companies, to talk more about different managements at helm and to discuss the
successes & failures with friends.
The fallacies
The trading strategy during the college days was engineered with a flawed design of three Fs; the search for only the fashionable stocks, the ‘follow the crowd’ approach, and the fear of not wanting to lose even a penny. This only resulted in a fourth fallacy of nature, ‘F***, I’m screwed!!!’
The widely traded blue chip stocks aka fashionable stocks did not eliminate the chance to make profits, but clearly this strategy ensured all likelihood to not discover diamonds buried deep inside a colliery yet to be unearthed. The second most important factor was the approach to follow the crowd. In a perfect market hypothesis, with innumerable investors following the fashion stocks, where it was impossible at one end to extract a better price appreciation from the stock, this approach on the other end also guaranteed gambling your money on advise of people who doesn't matter!!! The third fallacy was the fear of fear to lose money. This fear ensured no development of risk appetite for me as an investor.
The Trading Monk
What started the stock market expedition for me was the search for a path to trade on opportunities, to make as much as possible, and to live without fear in a constant wave of nervousness. Alas, only to realise the path is well crowded and nobody is sure where it leads to: hell or heaven for a monk!!!
The journey in 2010 took this
monk on a path though defined by others, but less travelled, a path where the
chances of success & failure were equal yet people failed, and a path where
patience is the fuel to reach the goal.
Landing a job as a rating analyst
helped me learn the concepts to analyze companies, the management, the
financials, valuations, and the credibility of projections. This further helped
me to start looking for the Companies
not known to people, yet are popular among other monks, the Companies which
made the old monks drunk (pun intended), and the Companies which made the great
‘Oracles of Omaha’!!!
From a Trading Monk to The Valuing Monk
Value investment is all about
finding the strong companies with a long term view that are trading well below
their intrinsic value. And it is actually not as easy as it may sound. Though
an amateur in this field of investment, but with an experience of almost five
years in the fight against losses, I would start analyzing companies I believe
in and share here through my blog. Hope this monk is able to let other souls be
freed from the shackles of loss and proceed to a path of glory.
Disclaimer:
The great Morpheus from the movie
Matrix tells Neo: “I'm trying to free
your mind, Neo. But I can only show you the door. You're the one that has to
walk through it.” Learn from the mistakes of others, not always you need to
commit one to learn. So, do make informed decisions and never ever get inspired
by what others have to say, just believe in self, that’s the best advise you’ll
get from your soul who knows you the most/best and wants you to be free (and not high). And this
investment approach is only worth every penny if a stock or a script is viewed
as a manifestation of the company. Or rather I may say, stock is a derivative like
instrument having base as the Company itself. Plainly buying a stock is
different from buying a stock in form of piece of a business you believe in,
the management you trust and the product you endorse.
See you guys soon, take care and happy investing!!!
2 comments:
Nice One trading monk!
A few questions that came into my mind:
- In today's world, is 'value' perception based? Point in case - $40 Billion plus evaluation of Uber.
- How do you think we should value a company? ( If you have a simpler answer than doing fundamental and technical analysis, then please do share)
Thanks Anupam for dropping by..Actually, the trading monk has already made a transition…:-)
Ok, regarding value being perception based? I’d say, every asset is a AAA rated asset at a given price...
The perception based valuation according to me is temporary, driven more by brand positioning and Goodwill, which as I said may by untrue or may not last long!!! Think of Facebook with a valuation of over $200bn, Whatsapp with a valuation of $16bn, and UBER of over $40bn. These examples only showcase the future business potential even if they are reporting losses year on year or are yet to achieve break-even. So are these Companies valued based on perception of making losses YoY or a feeling of holding large market share in future? …heard about Maharashtra Scooters India Limited having 7cr worth of fixed assets, no capital work in progress, and negative operating cash flows for last 10 years, but with a price appreciation of over 75% in one year!!! Is this valuation perception based?
My approach is to value Companies based on their free cashflows, the growth patterns and penalizing discounting factors…My approach is simple according to me, is not fool proof as I learn as the world learns and ever evolving. Please remain updated for future posts where I discuss valuation of various companies…
Happy investing!!!
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