When you spend a lot of time in the equity market and buy, sell, hold shares for a long period of time..some moss and junk is likely to gather in your portfolio. This happens because over a period of time with some innumeracy, laziness, lack of diligence, lack of well written rules..let me tell you about what I wish I had done with my portfolio..
- Have very clear reasons to buy: Roce, PEG, Ronw, – a very stringent mathematical criteria and then (and then only) meet / research about the management.
- Keep looking at the management especially if there is a change in the management from one gen to another.
- A deep stop loss – say I bought Hindustan Oil at Rs. 102. If i did not have a steep stop loss of 20%, I would have reeled with a much bigger loss – today the price is Rs. 30 or thereabouts, Obviously the falling oil price took its toll. It would have s…d my overall annual performance.
- A deep time limit: If i bought Hindustan Oil at Rs. 102 and it had not gone beyond Rs. 110 in one year, it better have a solid, solid reason. Again look at that reason in 12 months. Collect contrarian views. Re read the research reports. Call the analyst who had recommended it in the first place (and hope he has not changed his view). Ask the brokerage firms which love ‘commodity’ stocks and call the brokers who hate commodity stocks (experience tells you whom to call). In 15 months if it is not giving you index+ returns sell this piece of shit.
- Buy more if you are right: I bought Essel Propack from 22-23 right up till Rs. 80 and then sold off at about Rs. 105 in one particular cycle of about 14-18 months. It is important to put more and more money if the PRICES GO UP. We love to average down and NEVER AVERAGE UP. The conviction should be in the EPS, growth and management. We have conviction in the world looking at us as ‘heroes’ rather than in our research – that can hurt.
- We hate admitting our weakness, mistakes and a very small ‘circle of competence’ .
- Meeting research people with different view points is a must, must, must and a MUST.
- When you are sure that Hindustan Oil is a good shorting candidate at Rs. 105 ask a bull ‘why is HOEL a good buy’ and you will get an amazingly different point of view. Pack your ego and listen.
- Most big good investors are BORING to listen to – Prashant, Naren, Ramdeo – most of us can predict what they will say. Proves that putting a system in place is the challenge. Once the system is in place monitoring it work is as boring as watching paint dry.
- Read, read, read, read, read and Read. Then Read. Anthropology, Biology, History, Philosophy, Mathematics, Psychology, Mythology, Animal stories, …and of course capital markets. Read.
this is a very important post please remember it as far as possible……
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