ExpertDabbler

Now that the Sensex is back @ 15000 levels, the guys have started talking stocks in the office corridors again.

As contrived as it may sound, stocks are inherently risky and one can lose money in an overnight is a fact which cannot be stressed enough. And my humbling experiences are still fresh in my mind. Last year I bought 200 shares in a company called Quintegra solutions for close to 100 a share, based on, you guessed it, a tip from my friend. And I had the rare pleasure of watching it go from 94 Rs. a share to single digits in a short while. Its an indescribable emotion. The balance I have on this share right now will not even fetch me two litres of petrol.

What is fascinating to me most is that most of the folks are clueless on their holdings. They don’t even know the basics like

- the company’s business,
- the promoter,
- the profits and debts,
- the competition

These are all publicly available information for that matter.

The reasons for buying shares typically goes like,

- ‘Enakku therinja oruthar rembo naala shares pannitu irukaar, rembo nallavar….avar solvaar, avar sonna correct a irukkum.’

- ‘Broker recommend panninaan’

- ‘NDTV la potaan’

The point is not that they do not know. The point is they do not think they need to know.

If someone can’t tell a difference between a P/L account and a balance sheet, and an Adani from Ambani, why gamble with hard-earned money? This is not to say P/Ls and balance sheets are a great measure of the company’s worth in these times of fictitious books. We all know that any orangutan with a below average intelligence can pick this double entry book-keeping stuff in a matter of weeks. And orangutans like me need not necessarily make great investors. But for all its shortcomings, basic accounting knowledge is a very necessary stuff to know.

I think anyone who dabbles in stocks, must satisfy the following conditions in general.

- Know how to read the basic financial statements - P/L, Balance sheets, foot notes, etc.
- Read THE INTELLIGENT INVESTOR
- Know the Inefficient Bush Theory
- Know the principle behind race-track betting
- Know that analyst research report conclusions are for the most part uttalakadi and only slightly better than ‘Raasi palan’ in our favorite daily.

This is totally apart from the economics of the business which will take a lifetime of learning. We are not going to become Rakesh Jhunjhunwala in a hurry.

This is not to guarantee that my ‘quintegra’ like experiences will never happen if these guidelines are followed. All I am saying is at least it will not be as humiliating. The more one knows and learns, the less probability of getting absolutely creamed. Speculating without knowing the basic stuff is the same as jumping in front of a speeding MTC.

What am I doing in the market nowadays? For the most part, I do what Rahul dravid would do gracefully to an out-swinger pitched on or outside the off stump - let it go.

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On the other hand, all this mundane reading about investments have taken me away from reading good ole’ fiction. I do not remember the last time I read a good novel. I started ‘Oru Puliyamarathin kadhai’ and left it hanging in the same puliya maram in the first chapter. If Sundara Ramaswamy could not make me read a novel, I don’t know who can.

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There’s a lot happening at work. Being a design lead is like the role played by Gopinath in Neeya Naana…endless pointless debates, late conf. calls, crib fests aka One on Ones…life is different nowadays. As someone I admire used to say, ‘I have never grown this old before, I am learning my lessons and I am trying my level best..’ is how I would explain now.

Note: Regarding the title, I just decided I should publish one post today.

This entry was posted on Thursday, August 6th, 2009 at 10:53 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.