Busy Times

Market falls are busy times. 

No, we’re not busy whining. 

We’re busy buying.

Are we not afraid?

That the crack might deepen?

That it might go down to zero?

No.

We’re not afraid of this scenario. 

Meaning?

Meaning that even though such a scenario cannot be ruled out…

Huh!?

Yeah, it can’t be ruled out. With trade wars and back to back black swans waiting to strike, theoretically, the bottom is zero.

And you’re not afraid?

No.

Why?

Because I buy into fundamentally sound businesses…

…zero debt…

…great 5 year numbers…

…sometimes, great ten year numbers…

…and I buy with considerable margin of safety.

Still, one is normally always afraid, right?

Wrong. A small entry quantum strategy kicks out all remnant fear.

How?

This strategy leaves me liquid. Let it go down to zero. I’ll still have liquidity to buy.

And that which you’re buying…

…is sound, yes. If I buy something sound, it will yield returns. It’s like agriculture. Crops grow in good soil. They don’t grow well in bad soil. I make sure that I choose excellent soil.

How does one do that?

Due diligence. Period.

With all the scams and frauds going on…

Well, I look long and hard for shareholder-friendly managements. Representable salaries, willingness to share, largesse, debt-averseness, intelligence, business savvy, the list goes on.

What if you land up with a fraud management?

Solid research will make you avoid scamsters. I search the internet thoroughly for any kind of smoke. Crooks leave a trail, and one is able to catch their online trail pretty easily. 

Alone online?

Second recourse are annual reports. They reveal a lot. I don’t invest in a company without having a thorough look into its annual reports. I look at CSR, the director’s report, skin in the game, balance sheets, profit and loss statements, cash-flow, special items, what have you.

What if you still land up with a fraud?

After I know I’ve landed up with a fraud management, I would look to exit at the next market high. 

What if your holding is wiped out till then?

If it’s wiped out, I have many other holdings to lean on, and don’t forget the liquidity that is yet to flow into honest managements.

So you’re not afraid of the loss?

There is some risk one has to take. Here, it is the risk of being wrong. The good thing is, once I know that I’m wrong, I won’t double up on my wrong call. I’ll get busy elsewhere and look to exit from my wrong call with as little damage as possible, perhaps even in profit.

Profit?

You forget, I like to buy with margin of safety, and you’d be surprised at what people are willing to pay at market highs. 

I see, well then, happy investing!

Thanks! 🙂

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Nature of the Beast

Stocks…

…crash.

It’s the nature of the beast.

Stocks also multiply.

For stocks to multiply, one needs to do something.

What is that something?

One needs to buy stocks when they crash.

Let me give you an example. 

Let’s assume markets are on a high, and there’s euphoria.

Excel Propionics is cruising at a 1000.

The prevailing euphoria seeps into your brain, and you buy Propionics at a 1000.

For Propionics to multiply 10 times in your lifetime, it will now need to reach 10,000.

Likely? Wait.

Cut to now.

Stocks are crashing. 

The same stock, Excel Propionics, now crawls at 450.

You have studied it. 

It’s debt-free.

Positive cash-flow.

Ratios are good.

Numbers are double-digit.

Leverage is low.

Management is shareholder-friendly. 

You start buying at 450. 

By the time the crash is through, you have bought many times, and your buying average is 333.

For Propionics to multiply 10 times in your lifetime, it will now need to rise to 3330.

Which event is more likely to happen?

Just answer intuitively.

Of course, the second scenario is more likely to play out than the first one. In the second scenario, Propionics will need to peak 3 times lower.

Simple?

No!

Try buying in a crash.

You are shaken up. 

There’s so much pessimism going around.

Rumours, stories, whatsapps, opinions. The whole world has become an authority on where this market is going to go, and you are dying from inside.

What’s killing you?

The hiding that your existing portfolio is taking, that’s what’s killing you.

Are you liquid?

No?

Very bad. 

Why aren’t you liquid?

Create this circumstance for yourself.

Be liquid.

Optimally, be liquid for life. 

Then, you will look forward to a crash, because that’s when you will use your liquidity copiously, to buy quality stocks, or to improve the buying averages of the already existing quality stocks in your folio. 

How do you get liquid for life?

You employ the small entry quantum strategy.

Yes, that’s about right. 

We’ve been speaking about this strategy in this space for the last two years.

Read up!

🙂