The market goes through good and bad phases. That doesn't mean we also have to change our investment approach
11-Jun-2020 •Dhirendra Kumar
It's an uncertain time for stock investors. Or is it? One of the rules of investing (or rather, of anything in life) is that when everyone agrees on something, then you must consider the possibility that everyone is wrong. Contrarianism for its own sake may not be good but it's a good mental exercise. It ensures that one does not fall into the trap of ready-made opinions.
So getting back to the question of whether it's an uncertain time. What if it isn't? What is certain at this time, and what is uncertain? After all, there is never any high degree of certainty in equity investing. There are never any guarantees. Since my investing life has started, we have had some huge upheaval or the other every few years. Every time, it looked like the biggest ever. And every time, it turned out to be very big in some ways but smaller than expected in other ways. Might the current global pandemic follow the same pattern?
There is little doubt that this pandemic will be a huge setback for the world economy and for the lives of people. There is also little doubt now that sporadic outbreaks and lockdowns will continue for a long time, months or perhaps years. The question for us reading this magazine and for other Value Research members is how best we can deal with this in terms of our personal savings and investments.
In any upheaval, there are losers and there are winners. The question is, how can we increase the chances of enhancing our savings and returns by choosing winners? For someone who is familiar with the Value Research way, the answer should be obvious: by doing what we should always have been doing anyway.
Whenever there is a crisis of any sort in the economy or in a sector, the better companies suffer setbacks but the nature and extent of their setbacks are much less than those suffered by weaker companies. This means that our recipe for success is the same as it ever was, good times, bad times, or pandemic times!
This recipe is to raise your investing game to the highest level. This can only come from knowledge, from understanding, and from having some basis for looking at the future. It cannot be obtained from just the numbers of the past. It can also not come from naive projections of those numbers into the future. Numbers can guide us to a company, but investment decisions can only be made by understanding the business of a company. At Value Research Stock Advisor, that's exactly our approach. Our analyst team is numbers-driven, but only for part of the process.
Once the numbers have done their job, our real task begins - that of understanding the business. Only then can one have confidence in the investments. However, the job continues after we recommend the companies. As I mentioned earlier, in recent weeks, we have spent - I have personally spent - hours with the CEOs of some of the companies that we have recommended.
In each of these companies, we had a long conversation which was not just about the company itself, but about the sectoral environment, about competitors and about the economy in general. Moreover - and this is truly important - each of these interactions was one-to-one. Unlike the mass 'management interactions' that brokerage analysts have, there's no one else in our interactions. It's just the Value Research team and the senior managers from the companies. We have this privilege because of the reputation for absolute integrity and independence that we have created and preserved by our conduct over a quarter of a century.
The benefit for this goes to the subscribers of our premium service, Value Research Stock Advisor. While they get to read the interviews and watch the videos, our entire research process gets enhanced and benefits them in a variety of ways.
Not just the recommendations. For you, if you appreciate the process, then the right thing to do is to see our list of recommendations and our 'Best Buys'. However, do not stop there. That's just the endpoint of our process. As I have detailed above, for each one of our choices, we reveal our entire thought process. If you go through that, it will give you confidence to follow what we are doing, as well as learning to apply it elsewhere.
In a time of uncertainty, that confidence is of greater value than anything else.
Value Research Stock Advisor is a premium service where you get promising stocks along with their full analyses. We also actively track the underlying companies for you and keep you posted on the major developments in them, including when to sell a stock. Additionally, members get exclusive access to a range of tools and data which they can use to study any other stock. You can subscribe to the service here.