The problem of almost-good stocks

Like a cricket team playing to win a limited-overs match, many investors feel that aggression is a great quality in choosing stocks. However, as we all have realised while watching the World Cup, effective aggression, which gets results, starts with not trying to hit everything but deciding what not to hit. Stocks are the same. In our cover story of 'Wealth Insight' December 2023 issue, we have explored a fascinating idea that should be of interest to all equity investors - what looks like a safety-first approach to investing is a profits-first approach. There are good stocks, and there are bad stocks. Neither of these are any problems. Good stocks make money for investors; bad stocks are easy to spot, and thus, sensible investors manage to avoid them quite easily. The problem arises in the case of 'almost good' stocks. When we start investing - no matter what kind - the first thing to do is to classify them into the bad and the rest and not look at the bad again. So far, so good. E