Below was shared with my clients on Dec 22, 2020 (Sensex had fallen by 1,406 points one day prior) – Being produced verbatim.
With yesterday’s carnage in the stock prices, some of the key questions being asked by many of you:
1. Is Winter, rather March lows coming?
2. Good time to sell? If yes, how much, and what?
3. Good time to buy? What and how much?
One-day oscillation makes us question our beloved ideas/stories behind the stocks!! This clearly proves that someone who thinks that making money in equities is easy is fooling oneself. It was never meant to be easy in the 1st place.
Ideally some of these scenarios, viz. second wave of virus coming, markets being exuberant in some ways, bright and sunny days are ahead – should have been thought through. However, you only realize who has been swimming naked when the tide runs out!!
Now, do I know answers to the above questions and can predict? Of course, not!! Someone who says he can is lying. Look at his past record and you will come to know!!
The only way we can go about is *Preparing* oneself. With so much of noise, preparing oneself is one of the only ways to navigate through this. Preparation means taking a relook and asking pointed questions about the business models of the companies in question, their financials, cash flows and more importantly, how is the management reacting or executing the business, short term vs long term focus, etc. If most of these boxes are getting ticked, we have a winner at hand – in times to come of course!! Some of the actions / numbers may take time to crystallize, but stock prices are weighing machines and not voting machines – in the long run of course!!
Ah!! Enough of this above Bull S@%t!! I just want to know – what to do immediately!!
Start to *dip your toes*. If you are getting a stock 10% cheaper than what it was prevailing yesterday, your margin of safety obviously increases – at least with respect to the prices, provided you have done the above homework. Are you kidding?
Finally, I cave in!! Well, I would start to dip my toes with Vesuvius, Castrol, National Aluminium, ITC, VST Industries, Jaagran Prakashan – *gradually of course!!*
Will sell Care Ratings, Bajaj Auto, Star Cement – Gradually Again!!
Stay put, Prepare and Execute!!
Please note that the above stock names could have undergone a change – may be on account of allocation, exit – partial or complete, accelerating further purchases or complete reversals!! Please do take guidance from your advisor or do your own independent analysis!!
Disclaimer: Please note that these are my personal views. While I am NOT a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014, all investors are advised to conduct their own independent research into individual stocks or industries before making any decision. In addition, investors are advised that past stock performance is not indicative of future price action.