Are we in a bear market or a bull market? Odd question right? With the Sensex hitting all time highs, why am I even asking this question?
Simply because we do not invest in markets. We invest in individual shares. So there are portions of the market which have just not participated in the rally. Which are these shares? Well, the power sector – Tata Power, Ntpc, Cummins (loosely)…are shares which when seen from say 2009 look like a lost decade. Even for people like me who traded these shares, they do not look attractive at all. Assuming I am worried about Social acceptance, I would stay away. Same thing for Indian pharma industry. The last year was a big bonus for the Mnc pharma in my portfolio, but the Indian pharma industry too looked (looks?) like a lost half decade if you look at prices since say 2013. That is a long period of under-peformance for both these industries. Are Indian pharma like Sun, Lupin and Biocon available cheap? hell no. Their PE ratios are still high – very high, so you can argue that the 2011-13 madness is just about correcting. It has to be your call, but the cash that these companies have is not so bad. Am I saying these shares are worth buying? No. In fact I may have (or not have) a bull or bear position in all these shares, so please consult your adviser before you do anything.
I was just reminded of J M Keynes – I mean his role as an investor. His performance of his Endowment portfolio was awesome in the period 1922-46 – during the worst recession in USA and one of the bloodiest wars that man had ever fought. I think JMK’s COURAGE is not given enough credit. It is not about knowing, it is about doing. He had lost a lot of his college money by 1929 – but he had ignored the American markets till then. He then started buying (believe me it is tough to invest when you have eroded 40% of your capital, it requires COURAGE). He kept buying shares (at a time when the world was a buyer of bonds, if at all). There must have been parties where people looked at him like he was from Mars – social acceptance, my foot. He bought when the market had fallen 38%, he bought again in 1931 when it fell another 47%, and then when it fell another 5%..HE WAS STILL A BUYER. He bought U.S. stocks throughout the depression. That is a long time frame, he was managing somebody else’s money, he was answerable to a big group, but he still showed patience. When the US market fell another 38.6% in 1937, bought still more. By 1939, he had put half his main portfolio for the college in U.S. companies. He was of course the old style (I am too!), favoring high-dividend-paying shares, and full portfolios called investment trusts – what we call mutual funds (interestingly UTI was not called a mutual fund, it was called a trust). He also bought into utilities – dividend yields were interesting. Somewhat like Graham he realized that to make money you need to buy Value in a market bereft of buyers. Even with all this knowledge do we have the guts to buy Cummins (which has not fallen, but stagnated), Ntpc (yes I know the rogue promoter argument), Sun Pharma, Biocon -not exactly the kind of Suzlon or Dhfl. Question at the top of our minds HAS TO BE – are we being brave (courageous) or being foolish. After all life is not about what happens to us, it is more about how our brain processes what happens to us.
Assuming that you like the management of Sun Pharma (or Lupin or Biocon)..I am just giving examples (and all these shares – or their Puts could be in my portfolio or my friends, brokers, families portfolios) and had bought the share at 1200, would you have bought it all the way down to 400 or would you have sold off at 1000 saying “Let me cut my losses”. Let us say you had bought LMW at 3000, then at 5400 and then watched it go to 9000, but did not sell. You are still holding, and you bought at 3400 (or thereabouts) will you hold this to sell at 9000 or will you sell off at 4000 (lets say)? Then where was your conviction while buying at 5000? Are you reacting to results, fear, social approval (you should be buying tomorrow’s winner, not yesterday’s winner)……
Hey I am only a blogger I can’t give an answer.
Safely assume that I have some relationships with most of these companies, second disclaimer. Anyway I am just asking you – will you buy, do you have the guts, that is all.
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