Domino Capitulation !…Following Global Indices our Sensex too plunged 11% to close below 9000 at 8701.07, down 1071 points
As I blog this,the Dow has opened 5 % down in New York….if the Dow closes weak today, you know the fate of our own Sensex on Monday !…”Dow”n with the Dow !
Alright so we’re facing reality…but for God Sake our Ministers and Bureacrats should stop from sickeningly and continuously reassuring all of us ,at every major single day fall , that there is nothing to worry and our fundamentals are in place etc, etc ! …they’ve been doing this from 21000 levels!…they’ve not lost monies !…but retail investors have lost big time in the government’s fasttrack and over-zeal to develop the Primary and Secondary Markets
Irrational Exuberance was the outcome as the nexus of the media,unscrupulous merchant bankers,promoters and brokers hyped up the scene and played havoc with retail investors who were sucked in by obscene and vulgar Share Pricing in IPOs and manipulations even in the Secondary and F & O markets
It’s no wonder then that even though our Savings rate is in a healthy 30% to 35% zone,the Equity Component of Investment Asset Allocation is in the lower single digits….the swings,the volatility,the capitulation is just too scary…and searching questions on the Potencies of Capitalism itself are being raised.
It’s easy to blame authorities for your own irrationality but some of it is clearly justified as the Impotency of Exchange,Regulatory,Banking and Ministry authorities to curb malpractices and excesses in the system has been exposed…or was it vested interests that were involved ?….Rampant Insider Trading and Misuse of Participatory Notes and Derivative Instruments have destroyed market credibility.
USA is already naked and is now undressing the World !…Hispanics who have sneaked into USA are now trying to sneak back to their Countries !
In such times when Cash is King ,Low Valuations are ignored and discarded…..so even if I offer you Milk at Rs 5/litre, which actually should sell for Rs 25/litre, you’ll not buy !…for fears that there is something wrong with the Milk or that you may get it at Rs 3/litre the next day !
That’s what’s happening to Stocks too…we are now in Distress Zone…the World Order is Changing…so there is clearly more Distress ahead.
So should you be looking for Investing Opportunities ? Look at it this way…Sound Stocks can’t fall to below Zero !…that’s Dead Value,not Distress Value !
To narrow the search for Companies that hold Investment Potential and are available at Distress Prices and even below !,your Research Filter should look for Companies that
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have little or no debt
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will survive into the next 10 years and beyond
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fulfill a strong and inelastic need
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have strong cashflows
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have more cash/share in their books than the share price
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have sustainable earnings,preferably with growth rates of atleast 15% yoy
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have potential to scale up
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have a Price to Book Value of below 0.5
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have a favourable Price/Earnings and DCF Value Skewness of over 100%
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are in Emerging Sectors
But I reiterate don’t be in a hurry to Invest….Share Prices are not going to runaway up anytime soon…and yes ! stop watching too much of stock channels…. It was a mistake in the first place to do so…..get on with your life