Matter is empty space, 99.99….followed by many many nines %, yet why things do not pass through each other, because of electrostatic field. You cannot really touch anything, only the electron shell cloud presents negative force field to the world, like charges repel, hence the worlds stays in suspension.
When we look at the stars at night, we are really seeing what the stars were a few hundred/thousand or more years back, not what they are now.
Deception is all abound, the only thing we are certain of really is that we exist.
Its an extremely fascinating matrix to be trapped in. A matrix that is touchy, smelly, feely, tasty, soundy and so on.
In this matrix of delusion, we are for the most part spending our time in one of the many specializations besides being entertained. In a larger sense were are inside a prison (9-5 work) inside a prison (trapped in a physical body) (didn’t mean to sound all that gloomy :)), but the hope for escape is only possible for those who feel they are in prison. One who feel at home in the penitentiary, obviously have no plan to break 🙂
All simplistic measures of values can prove to be quite deceptive,
P/E ratio (earnings could be temporarily down, or a long runway ahead renders it relatively less meaningful)
P/B (Assets on book may have no real value, no assets on book may have a lot of value)
Dividend Yield (Company may be in a sunset industry)
Family vs Professional management
Developed vs Developing country (Many attractive companies in developed world, and overpriced in developing)
Market Cap / GDP (quite a bad barometer if less companies are listed in a country, or more activity is in unlisted space)
I have really not found any meaningful sense from the accounting snapshot / a frame in time.
Like a multi pronged attack on the Tuberculosis bacteria, if the confluence of three to four factors converges on a publicly listed stock, it generally translates to profit. I am also more increasingly convinced of the need for Process over Outcome model, since we humans cannot have great insights with our limited intelligence but if the process is strong, then outcomes will take care. Also, it means a portfolio approach.
Factors to look for:
- Earnings Upgrade
- Increase in Market share
- Competitors exiting (Gold loan)
- Near Monopoly or Monopoly (Stock Exchange, Linkedin, Job Websites in many countries, Ebay/Trademe etc)
- Small cap, less than 100 million $ MCAP
- Low institutional ownership
- Increasing earnings and dividends (interests alignment with minority)
- Reducing debt / No debt
- Hitting new 52 week / lifetime highs (Market / select investors may know something you do not)
- Closure of un-related / non-core / loss making business
- Management buying from open market
Stock Exchange is a fascinating business. Hope to write in future on it. Self-listed exchanges like NSE Kenya are available for 40 Million USD (50 million population). ASX Australia is available for 7,500 Million USD (23 million population). NZX New Zealand is available for 200 Million USD (4 million population).
All in all, a few correct decisions are required in a lifetime to make a LOT of money. Eg: Tata Group started 148 years back. That is actually a very long time for compounding to work its wonders. 1000 USD (65,000 INR at on 2016) compounds to 962 Billion USD at 15% CAGR over a 148 year period.
Current Market Cap of several 100 companies in Tata Group is approximately 150 Billion USD. Had Tatas not decided to enter ICT business and set up TCS, the Tata Group Market Cap from the rest of 100s of companies would have been half, ~80 Billion USD.
So, make right decisions and don’t hesitate to change your mind. Don’t have mental price targets, be open to re-evaluate current stock holdings quarterly and buy those that have a long runway. Very few toads turns to princes in the investing world, none so in the real world.