Value Research Monkey/Goat Advisor

Stocks that you own are going to go down sharply at some point. All of them are large cap, mid cap and small cap. Any sector, any industry, any business. It's not just normal but inevitable - as inevitable as someone falling ill or having an accident. It could be a market crash, some sectoral thing or even a generalised economic downturn.

The question is, what happens afterwards? Some 16 years ago, when the stock markets were racing to a new high practically every day, I wrote an article about the stock markets with a story about monkeys and goats. Here's how it went.

One day, a man appeared in a village and offered to buy all the monkeys the villagers could supply for Rs 1,000 each. The villagers caught all the monkeys around and sold them. Soon, another man appeared and offered Rs 2,000 for each monkey. However, there weren't any more monkeys around, so the villagers couldn't sell the man anything. But, they figured that, for some reason, the demand for monkeys was going up, so they looked for the first man and bought back all the monkeys for Rs 3,000 each (which was the least the man was willing to take). Unfortunately, this stratagem was a failure, and the buyer never reappeared.

Nearby, there was another village where the same story was repeated, except here, it was about goats. Here, too, the final buyer never appeared, and the villagers had to keep the goats themselves. However, there was a big difference. The monkeys were a nuisance. They were noisy, troublesome and dangerous, and they stole food all the time, so the villagers eventually abandoned them in the forest. The goats, however, weren't so bad. Even though they cost a lot of money, they were easy to keep. They just grazed on grass and gave milk. When they grew older, the villagers slaughtered them for meat. All in all, buying goats was not the bad deal that it looked like in the beginning. In the long run, it worked out to be a good purchase.

The moral of this story for equity investors is quite clear. When the stock market is in a bull run, all kinds of stocks are available at ever-higher prices. However, there are high-priced goats in the markets and there are high-priced monkeys. Back when I originally wrote about this, there was a huge crowd of all kinds of monkeys in the markets. There were infrastructure monkeys, real estate monkeys, giant monkeys, small monkeys, there were even entire business groups made up of monkeys. Many of these monkeys were disguised as goats. It's the same now, except that the sectors have changed, and there's the notable addition of digital monkeys this time.

Anyway, digital monkeys notwithstanding, my point is that equity investors need always to ensure the essential quality of the companies they invest in, regardless of how the markets are priced. Goats - stocks of companies with solid fundamentals - may not seem as glamorous or promise astronomical short-term returns. Still, they offer stability and the potential for steady growth over the long term.

However, for the individual equity investor or the beginner, the next question is how to identify the goats from the monkeys. Well, that's what we do here at Value Research. Our Value Research Stock Advisor could actually be renamed Value Research Monkey/Goat Advisor.

Over the half-decade that this service has been operating, I have lost count of the number of almost-good stocks that we have rejected. In our way of thinking, this is very important. Far too many investors, when choosing stocks to invest in, are obsessed with finding the absolute top performer and sticking to it. Unfortunately, unless you are a genius and lucky, this doesn't happen. What happens is that such investors flit from idea to idea, generally chasing past performance and buying into yesterday's winners in an effort to spot the greatest winner. Once in a while, it works out. In other words, they are always looking for goats and paying no attention to avoiding monkeys.

At Value Research, we diligently sift through the market to separate the 'monkeys' from the 'goats'. Our analytical approach, applied across both this magazine and Value Research Stock Advisor premium service, is fundamentally based on a process of elimination. For any selection, we start by discarding stocks that carry any negative attributes. Regardless of their positive aspects, certain red flags are absolute deal-breakers for us.

Our list of deal-breakers is inviolable and forms the core of our decision-making process. Later in the process or after investing, this provides great comfort. Even if an investment thesis is wrong, there is no great disaster. One can always sell a stock if it has some problems or some better alternative comes along. The problem will be small and easily contained if it's not a monkey.

So, what exactly does Value Research Stock Advisor get you? You get:

• Access to all our stock picks
  
• A set of starter stocks was 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

Our system works because it emphasises fundamental analysis and the pursuit of long-term value. Our strategy extends beyond mere enthusiasm for purchasing stocks; it's about comprehending the rationale behind each selection or dismissal. Rooted in comprehensive research and a reliable methodology, our guidance is not merely a response to prevailing market conditions but is informed by the enduring strength of business models and genuine wealth-building opportunities.

As you can see from the above feature list, you, too, can learn to tell the monkeys from the goats. We believe that an informed investor is a successful investor. Therefore, we not only provide recommendations but also offer detailed analysis and updates on these picks. This ensures that our members are not just blindly following advice but are equipped to understand the reasoning behind each investment decision.