Many years ago, there was this Hollywood movie named 'Conspiracy Theory'. The main character of the movie believed in all sorts of conspiracies. Since this was before the age of WhatsApp and Twitter, he would print a newsletter with these theories and sell it on the streets. One of his theories was that the US space shuttle Atlantis was testing an earthquake weapon. He had authentic newspaper clippings to prove that during every single one of Atlantis' missions, there had been a significant earthquake somewhere in the world. The interesting thing was that this was actually true and in real life too, not just in the movie!
The problem was that he never looked for earthquake-related news items during the times when Atlantis was NOT in orbit. As it happens, there is at least a magnitude 5 or 6 earthquake somewhere in the world practically every day. If you followed the above technique, you could actually 'prove' that there is an earthquake somewhere in the world every time a major new COVID variant is discovered or every time the dollar falls in value.
Unfortunately, far too many equity investors feel that there are some hidden mechanisms behind stock prices too. How does the stock market work? I don't mean that question the obvious way - that it's a place where people buy and sell stocks through brokers. What I mean is how you think stock prices are really set. What is your mental model of how prices are decided?
I believe one of the fundamental reasons why so many people have trouble investing in the stock market is that they have severely flawed mental models of what determines a stock price. A lot of people feel that stock prices react continuously to a large number of events and facts, some of them being secret. You need a large organisation, like a big broker or a foreign hedge fund or something like that to correctly figure out whether a stock's price will go up or not and whether one should invest in it. They think an individual cannot do that.
This leads them directly to the so-called 'tip' mental model of stock investing. In this way of thinking, someone else, some big shot of one kind or another, decides or at least knows which stocks will move and which way will they move. The only hope that an individual has is to somehow get this secret information in good time.
If you have any suspicion that any of these ideas may be correct, and you need some huge organisation or some secret information to make money on the stock markets, then let me reveal the real secret to you: none of this is even remotely true.
As a mutual fund analyst, I have spent years - decades, actually - closely observing and evaluating the work of professional investors and few, if any, of them have any inherent advantage that an ordinary retail investor does not have. All they do (the successful ones) is to research systematically, consider all available information and not get swayed by temporary fads or flavours. Most importantly, they have a firm belief in the correct mental model of investing - that all the information and knowledge that one needs to invest well is publicly available to anyone who wants to use it.
Nonetheless, it is definitely true that while an individual investor is smart enough to do well, the volume of work required may be a bit too much. You do need to keep track of a large number of companies, choose the ones that are worthy of investing, buy them at the right value and keep track of them fairly regularly. How are you going to do all this? Surely, this needs an organisation, a research team.
As I like to say, that's where Value Research comes in! For those of you who have not yet paid attention to this service, I'll give a quick primer: Value Research Stock Advisor is exactly what the name says. It advises you on which stocks to buy. Our research team maintains a list of stocks that you should invest in. You invest in them and make money. At any point of time, we also maintain a list of about a dozen 'Best Buys Now' stocks for those who are beginning at that point. When any of the stocks is no longer investment-worthy, we advise you to sell them. What could be simpler?
The list is an input that you can use as-is or as a shortlist for further research, the tools for which we also provide you. One such additional tool is our Stock Screener, which is a unique system unlike anything else that is available in India, as well as detailed financials of every listed Indian company, not just the ones that are on our recommendation list. It goes without saying that our team also supplies you with updated guidance on all the stocks on our list, including the rationale for investing or disinvesting.
All in all, this is what you get:
- Access to all our (currently 50) stock picks
- Best Buy Stocks: 18 stocks selected from our recommendations. Use this set to start building your portfolio right away!
- The complete investment thesis for all recommended stocks so that you understand why you are investing
- New recommendations as soon as they are released
- Continuous updates and analysis on all recommended stocks straight from our dedicated analyst team
- Tools and data to research and analyse any other stock
So, head over to Value Research Stock Advisor and start beating the so-called professionals.