Views on Life & on Equity Investing

Wonder, Wealth & Abundance

Investing Mistake

with 24 comments

I wrote briefly here on investing mistakes:

If we could see people’s mental body, it would be a hilarious experience. Someone would have giant hands with more athletic personality, someone with less will power will appear pale, another person with can appear to possess a tiny stomach but a enormous head.

Worst part of all is the late diagnosis of such problems until its hopefully not too late. We are all experiencing one form or other disease if not physical then partly mental and one could say definitely some spiritual.

One of the lessons I want to nail down pertains to exiting a stock. Most season players will offer you explanations like:

– When original premise of buying stock has proven wrong
– When you need money for yet another security which is more attractive
– Fundamentals of the company have deteriorated.

What confounds me is HOLD rating on a stock. What is HOLD in the name of bull ! its a BUY or SELL.

Those same people will make the following statement, time and again.

“Those invested at cheaper rates may continue to hold the stock but do not make new entry at this price”.

Lynch makes it crystal clear when he writes, “If you are not going to buy more of a certain security, you should be selling it”.

Therefore every single day/quarter the stock has to be evaluated for a BUY or SELL against available opportunities, there is no HOLD. I know I have strong opinions and other techniques may work but this works for me.

Written by amitdipsite

August 16, 2011 at 8:42 am

Posted in Uncategorized

24 Responses

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  1. Hi Amit!

    This is really a good point for my learning. Thanks for this kind of easy principles that we need to use it on dauly basis yet 'everybody' makes mistake on this. In the office my first task is open your website and read if any new article/comments are there🙂

    regards
    Nagesh

    kollanag

    August 16, 2011 at 1:09 pm

  2. hold—for me will be when a stock is withing a range of not so cheap to buy…and not too expensive to sell…

    its just likely to float withing a range.if bull run comes it will rise..if bear market comes it will fall..simply put.

    i hold my shares only when i want to buy more of it at lower rates…then when rates come down i become happy.altough i may be having small qty of shares…it gives psychology pleasure…i win even it may seem i loose as my share come down…but that small qty that im holding could infact have been made free trading/very low cost/etc..etc..

    thats what hold means to me…

    else its not prudent to buy a stock which is in hold mode…better to buy in bear market…then hold…if bought in bear market.it will work.

    vivek bha

    August 16, 2011 at 1:13 pm

  3. manjushree techno..around 85

    have u looked into this midcap…what would be the asset turnover ratio and expected npm on that turnover…looks scalable business for next 10-15 yrs….still at 110 cr market cap.could be a 500 cr co or 1000….when sales will be 400-500 cr with npm of 6-7%.

    vivek bha

    August 16, 2011 at 1:16 pm

  4. What is your view on MMFSL now?

    shri

    August 17, 2011 at 5:21 am

  5. Few quotes which points to Investing mistakes, I like are:

    • There's no shame in losing money on a stock. Everybody does it. What is shameful is to hold on to a stock, or, worse, to buy more of it, when the fundamentals are deteriorating.” – Peter Lynch

    Also something very fantastic about HOLD, after reading this I cut down lots of stocks:

    • Holding = Passive Buying. Therefore ask
    “Would I buy this today?”
    • Holding should be considered a choice,
    not a default.
    • When, considering holding, I must ask if I would now BUY the stock,if I did not already own it.
    • Companies in trouble take YEARS to get fixed. Many will die first.
    …etc etc…

    Thanks Amit for these learnings.

    Rahul Kumar Paliwal

    August 17, 2011 at 10:32 am

  6. Good points Rahul which should be etched in memory.

    Amit Arora

    August 18, 2011 at 1:18 am

  7. MMFSL sold out completely from 105-95 on way down. Will be watching it again. Let wait another quarter.

    My big bet is on Cravatex. Good things can't stay down, they can but not too long🙂 Wishing I had bet as heavily @ 100, we learn..

    Amit Arora

    August 18, 2011 at 4:16 am

  8. Amit Arora

    August 18, 2011 at 7:41 am

  9. Hi Amit,

    Interesting piece about the hold rating….. Read this piece sometime back which mentioned that if a brokerage/investment bank put out a Sell rating then the company stopped inviting analysts from that brokerage for their quarterly conference calls (SEC passed a regulation sometime in early 2000 preventing companies from excluding analysts of certain brokerages) and also stopped considering such investment banks for any fund raising…. So a Hold was invented and apparently is considered a less 'in the face' Sell call :-)….

    Sajeev

    August 18, 2011 at 2:26 pm

  10. Hi Amit…

    Do you foresee that Cravatex can be able to get the license for marketing FILA Watches and Apparel in India?? I dont see any kind brand building or marketing efforts from Cravatex or FILA in India. Don't you think that Fila also needs to be advertised or marketed as such Reebok , Adidas etc to improve its Top-line significantly. I mean i dont see any significant developments are taking place to improve their Top-line. Would be glad if you can share any such information on Cravatex.

    sandeep maddali

    August 18, 2011 at 4:40 pm

  11. Hi Amit

    JB chemicals is giving 40 Rs dividend per share.

    http://www.indiainfoline.com/Markets/News/J-B-Chemicals-moves-north-on-dividend-bounty/3901923102

    Do you think we can make 10% in 1 week?

    Thanks & Regards
    Manjunatha

    Manjunatha

    August 25, 2011 at 12:12 pm

  12. Hey Manjunatha !

    I think its not possible in a week. I feel the day after record date the stock will be 100 Rs, happy to be wrong for those invested🙂

    Regards

    Amit Arora

    August 25, 2011 at 9:04 pm

  13. Hi Amit

    You are right.Now it is trading @ 93.I think management will announce these kind of news after big insider accumulation.It is an example for investing mistake.

    I will buy few stocks from my list if available at my price.

    http://www.manjunathastocks.blogspot.com/

    Please tell me whether stocks in my list are ok?

    Please look into JOCIL. It has potential to give 20 bagger returns in next 10 years with good dividend yield.

    Thanks & Regards
    Manjunatha

    Manjunatha

    September 1, 2011 at 7:45 am

  14. Hi Manjunatha,

    There is no place in your blog to write comments. We have lots of common stocks. I would exit out of #42, don't know much about #44 and nothing abot # 56. Rest are decent

    Good job

    Regards

    Amit Arora

    September 1, 2011 at 8:11 am

  15. Hi Amit
    Why would u suggest an exit on gujarat reclaim rubber. Yes,the return ratios are coming down. However, the management has talked anout a topline of 1000 crores in 5 years. FY11 is only 180 crores.

    selvan

    September 3, 2011 at 7:19 pm

  16. Hi Selvan,

    Why would I suggest an exit on gujarat reclaim. I don't I made that remark

    Cheers

    Amit Arora

    September 3, 2011 at 9:41 pm

  17. Hi Amit

    You had mentioned that you would exit out of 42 of “http://www.manjunathastocks.blogspot.com”; and 42 in that list is gujarat reclaim rubber.

    Regards

    selvan

    September 4, 2011 at 8:30 am

  18. Oh I see Selvan,

    The list has already been changed. #42 was Edserv at the time of my comments which Manjunatha has removed now. I understand the confusion now

    Regards

    Amit Arora

    September 4, 2011 at 8:37 am

  19. Hi Amit

    Thanks for the clarific.
    BTW, after long wait, globus has obtained all clearances for the merger of associated distil. With an expected eps of 24-25, globus is really attractive. And if there is one real indian consumption story, its the alcohol beverage space and its somewhat neglected due to the corporate governance of shri malllaya.

    selvan

    September 4, 2011 at 9:49 am

  20. Hi Amit

    Yes, I replaced my list #42 Edserv with gujarat reclaim. But I believe Edserv is better than Educomp & Everon because I like companies where founders are husband and wife ( Glodyne too ).
    I may be wrong.

    I am able to shortlist only 50-60 companies at this stage which may grow at 25% CAGR but I believe there are hundreds of companies in BSE which can give 40-50% CAGR returns in next 10 years.

    In last decade more than 10 companies have given 1,00,000% returns ( 1000 bagger ) and more than 100 companies have given 10,000% returns.( 100 bagger )

    Challenge will be to do buy/partial buy and sell/partial sell at right time for right stock.

    Thanks & Regards
    Manjunatha.

    Manjunatha

    September 6, 2011 at 3:58 pm

  21. Hi Manjunatha,

    True true, that is why I keep harping that diversification vs concentration is a real dilemma.

    Whether to bet 10-20% funds in a sure shot 25% grower or put 1% in 100 stocks, each with 20-100 bagger potential in a decade. Problem is we cannot clearly forward past the fog of next five years.

    I am not that comfortable with Pharma but there will be lots of 20 baggers in that space by 2020.

    Regards

    Amit Arora

    September 6, 2011 at 8:32 pm

  22. Hi Amit

    http://www.gfmag.com/tools/best-banks/11382-worlds-50-biggest-banks-2011.html#axzz1XvjHQvdr

    I am sure atleast 5 Banks from India will be in this list by 2020 and 10 Banks by 2030.

    One should stay invested with atleast 10% of his/her Asset in best Indian Banks for next 20 years to enjoy the magic.

    Regards
    Manjunatha.

    Manjunatha

    September 14, 2011 at 1:31 pm

  23. True,

    Could allocate even higher proportion but across a diversified number of banks.

    Regar

    Amit Arora

    September 14, 2011 at 9:14 pm


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