Warren Buffet’s 2 popular rules for investing are:
1. Never lose money
2. Never forget rule no.1.
As thought-provoking and intriguing as these lines are, so is the art of investing. Enthusiastic about broadening our horizons in the blackbox of investing, as the day progressed on 30th October, the adrenaline levels of all finance enthusiasts at IIML knew no bounds. The founders of Screener.in, Pratyush and Ayush Mittal were coming on campus to enrich our evening with their investment insights.
The evening began with the brothers sharing with us how their investment journey began with their father’s influence and also shared some principles on which they base their strategy- “Be optimistic, Protect capital, Buy Cheap and sell Dear.” Provoking us to budge from the regular practice of attempting to make quick money in the stock market, they explained how it can be equated to a casino. Wealth can be created only over a long time period. This is particularly true when you are looking at unpopular stocks that will take time to reflect their true value.
Thus, we need to stay patient and trust our value picks. Further, we got a sneak peak into their investment philosophy. Taking the bottom-Up approach, they told us that it was necessary to focus on the underlying business. Clarifying some common misconceptions, they told us:
- Sensex is not the right indicator. Whenever you have money, it is the right time to enter the market
- Catch small cap stocks at their inflexion point. Following large cap stocks is not the right approach. They are over-researched
- Go for the contrarian view after substantiating it with facts
- Investing is about developing conviction and riding the winners; about staying invested, sharing and scuttlebutt. Fear of losing money should not make you exit early
The Mittal brothers also shared with us some pointers that we can check for, while evaluating a stock:
- Look at the company’s story to predict its future performance
- Does the company have an offering that would boost sales for future years; or does the management have determination to develop products to further sales potential
- Some quantitative checks to avoid pitfalls were also shared- Equity dilutions, borrowings, promoter pledging, poor dividend payout, related party transactions, working capital deterioration, and their like
In order to enable us to perform all of these functions with ease, Screener.in offers assistance by providing a user-friendly interface that would enable you to create your own queries, get email alerts for announcements, credit rating inputs, create your own watchlist, and undertake peer comparison.
The session was thus, one that helped both students and professionals alike, as they advised us on how to go about investing as a novice, while they addressed all the queries that the experienced ones had. The evening was a knowledge enriching one as it not only gave us the mantras to be followed for investing, but also an insight into the practicalities and how we can expose ourselves to this dynamic world and seek to make some profits!
The above article has been written by Devisa Todi, Credence Capital (IIM Lucknow)