This is Why Your Blockbuster Gain Story is going to Happen

You’re learning to sit. 

You buy with margin of safety. 

You buy in small quanta,…

…and that’s why you’re always liquid,…

…to avail any opportunity that arises. 

Yeah, there’s nothing impeding your liquidity…

…because you’ve kept yourself virus-free, i.e. debt-free. 

You only buy quality…

…that’s going to be around for a long, long while,…

…because you don’t sell for a long, long while. 

You don’t listen to what the grapevine is saying…

…because of the conviction and strength of your own research and opinion.

Yes, you regularly go against the crowd. 

You either buy into debt-free-ness, or into managable debt that spurts growth. 

Your input into the market doesn’t affect your daily life, leaving you tension-free to address your non-market world and thrive in it,…

…and that is why,…

…for all the above reasons,…

…your blockbuster gain story is going to happen,…

…and what’s more,…

…you are also enjoying the ride leading up to it. 

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How to Enter into a Growth Stock

You can play this one in different ways.

The successful way for you will depend upon your risk profile.

What we will be discussing here is a kind of a value way for growth stock entry.

Fine. What sets growth stocks apart from value stocks?

Valuation.

Growth stocks have high multiples.

What does that leave us margin of safety people?

Will we completely have to stay away from growth stocks?

No.

There’s a way.

Loosen your margin of safety criteria slightly. Bring it up to, for example, PE < 15, amongst other things. (We’ll compensate for this loosening, you’ll see).

Now wait.

Let the stock correct.

PE goes under 15.

Don’t enter yet.

Now we compensate.

We let more margin of safety develop in the price.

We want price going down to a technically viable level for entry.

This can be a Fibonacci level, a support, a base, a pivot, or what have you.

Three things have happened.

You have identified a stock through your due diligence.

You have waited for it to reach desired valuation after raising your valuation criteria a tad to compensate for the growth aspect.

You have compensated for your compensation by waiting further for a technical level to be hit before entering.

Now, you enter.

Your entry price becomes your base. (Subsequent entries will always refer to the base-price average).

You have entered with your minimum entry quantum.

You will take many entries, each with your minimum entry quantum.

You will keep taking entry till all the above criteria keep being met.

When even one criterion is not met, you will stop entering and will sit tight.

You will keep watching the stock and its management.

If entry criteria are not met for a long time, but stock is still not over-valued as such, you can enter once for every shareholder-friendly act of good governance, upon an interim dip in price.

You will only stop entering when over-valuation rules and becomes obvious.

You will think of exiting when you are no longer convinced about the stock.

Exit will be done upon a market high only.

Hopefully, you won’t need to exit for a long, long time, so that your investment turns into a multi-multi-bagger!

🙂

A Small Entry Quantum per Day Keeps the Doctor Away

Your ears are probably swelling from all this talk about a small entry quantum (SEQ) per day.

However, you are also noticing the practical element of the SEQ, especially during the current correction.

Whatever’s happening in the world is happening. We need to long-term invest on the basis of what’s being offered to us. When we see margin of safety, we act.

However, we could go on seeing margin of safety for years upon end. Therefore, our entry quantum per day is small, so small that we can last out purchasing for quite a while, and still have ample liquidity left over for all other necessary aspects of life.

There’s another benefit of the SEQ though.

Let’s say that one of your holding turns rogue.

It can happen. So many scams are emerging. There’s a new scam every day.

So let’s just assume, for assumption’s sake, that the management of one of the stocks you are holding is involved in a fraud, and this fraud has come to light.

Where does that leave you?

You stop accumulation of this stock immediately.

Don’t expunge it yet. You’ll lose out. What if the scam is a hoax? Find out. It might blow over. Management might change. Your conviction in the stock might be rekindled. Wait for a market high. If you’re still not convinced about the stock anymore, expunge it on a market high.

What did the small entry quantum do for you here?

You had accumulated the stock over some kind of period, SEQ by SEQ, right?

When the fraud exploded, your holding wasn’t that sizeable. SEQ, remember.

A fraud management won’t wait multiple years to let their fraudulent natures act. Sooner or later, a fraud will get caught. Sooner the better. When this one is caught, your holding is not enormous. It’s size depends upon the number of years of holding and conviction.

The greater the conviction, the longer the holding and the lesser are the chances of the management consisting of fraudsters.

Your small entry quantum has ensured that over many, many years, stocks that end up getting accumulated majorly are the ones where conviction strengthens year upon year upon seeing multiple practices of good governance and shareholder-friendliness.

Scammers stop getting accumulated long ago. They are expunged on market highs.

After a decade or two, your portfolio is brimming with honest multibaggers.

Wave Buying upon Prolonged Corrections

Where there are markets, there are corrections.

At first, they cause us dismay.

Slowly, we get used to them.

Then, we start using them.

Next step is – exploiting them.

One can speak of exploiting if a correction persists, and one is long-term investing.

During a persisting correction, we purchase in waves.

How are we defining a wave?

Go through your long term portfolio and pick out those stocks that are offering margin of safety.

You convince yourself of their health once again. Still healthy? Go ahead.

You purchase them one by one, one per day, by putting one entry quantum into the market for each purchase.

There will be greed to buy more than one underlying in one day. Don’t give in. This will allow your buying power to persist alongside a persisting correction.

The size of your entry quantum needs to be small enough to sustain entries all year round, still leaving ample liquidity on the side. Your long-term strategy should not immobilise your financial and familial activity in any way. Thus, an optimally small enough entry quantum is vital.

You’ve gone through a wave.

Breathe.

Correction persisting?

Go through your long-term portfolio again.

Where does margin of safety still exist? Pick out stocks list.

Go through next wave.

Repeat.

Till when?

Till no margin of safety is offered, or if you feel that the buying limit with a stock is surpassed.

4-5 such waves can really ramp up your portfolio.

What happens if corrections continue over multiple years?

Take long breathers between sets of waves.

Keep doing due diligence. If you’re not convinced about a stock anymore, don’t include the concerned stock in the next round of wave-buying (you can exit such a stock completely upon a market high; wait patiently for such a high and then throw the stock out, if still unconvinced about it).

Yes, ultimately, markets will start to rise again. Margin of safety dries up. You stop buying.

Your portfolio will now start showing its health.

Why?

It’s been accumulated with conviction, at the right price.

Congratulations.

🙂