Don't fall in love !

From the investors.com.

Don't Fall In Love With A Stock
BY CHRISTINA WISE

Falling in love can be wonderful. There's an extra bounce in your step, the sky seems a little more blue, the air a little more sweet.

But if the object of your affection is a stock, you're in for heartbreak sooner or later.

It's easy to grow attached to a stock, particularly one that's made you a lot of money. After all, you brilliantly spotted and invested in it. And the company, like a favorite child, can do no wrong.

Missed earnings for one quarter or two? You might dismiss the news by saying they've just hit a small bump in the road. A sharp downturn in price on an avalanche of trade? The short sellers are conspiring against you and your investment sweetheart.

Ignore the warning signs long enough and you could watch your profits, even your initial investment, evaporate.

So no matter how you feel about a company's products or its stock, keep studying the stock's price-and-volume action. Refresh your memory about good sell rules that help you cut losses and lock in gains. Finally, develop as best you can the discipline to execute these important rules. After all, you're in the market to make money.

People made a lot of money riding Commerce One, Qualcomm and other wonder stocks north in 1999 and early 2000. They led the tech revolution and were seen by many as having almost unlimited growth potential. But as past booms show, all good things eventually come to an end.


The 12 stocks in the chart above were the top performers of 1999, rocketing an astounding 1,744% during the year on average. Most gave back all their gains and more.

If you were caught up in this market-induced love trap, you're not the first. Getting overly attached to stocks is a rut that novices and experts alike have fallen into time and again.

Even Nicolas Darvas, the nightclub dancer turned market master, found himself getting overly attached to his winners in his early trading days in the 1950s.

"I thought of them as something belonging to me, like members of my family," Darvas wrote in his book "How I Made $2,000,000 In The Stock Market." "I praised their virtues day and night.

"It did not bother me that no one else could see any special virtue in my pet stocks to distinguish them from other stocks. This state of mind lasted until I realized that my pet stocks were causing me my heaviest losses."


What does this tell you ? Sell Reliance if you have made big profits in it. Same goes with HLL, it might have recovered from its 52 week lows, but short term future doesnt look too bright

Timing the market !

When did you last sell something and it went up the next day ? It happens to almost everyone including you and me. Timing the market is a strategy where you try to predict the market to increase your profit by constantly booking profits and buying new stocks. So you want to buy at every rise and try to skip the fall. Okay, now, do you know anyone who has timed the market and been on the right side more than 75% of the time ? If so, do let me know. The best way for small investors is to invest for long term and avoid timing the market.

Market Term - Cats and Dogs

Cats and Dogs in a stock market refer to those stocks with shady background. These companies would have bad records in the past be it earnings, dividends or would have involved in some illegal activity.

Short sell it !

Short selling is a very interesting concept in the stock market. It basically lets you make money even when you are in bear market. Before we move further, this is only for traders and not for long term investors. So, if you have a great risk appetite, read on !

Short selling works like this, for example - Reliance stock now has been suffering because Dhirubhai's kids are quarelling for 90000 crores. Now, you know that the stock has very limited upmove and whenever one of the kids starts uttering something, the group stocks go down. However you know that the stocks will recover soon enough. So, what you short sell it , you actually aren't buying a stock, but borrowing it from a investor who thinks long term or a broker who has it in his inventory. If the stock price falls, you can buy back the stock at the lower price and make profit on it. If the stock price rises, you have to buy and give the shares back to your broker and hence you lose money.

Short selling is for people who speculate and for people who hedge. We all know what is speculation, hedging is where you sit on the fence and short as well as go long so that if the market moves the other way, you still are safe because you are shorted.

10 Crippling Mistakes

Here is an interesting article from thestreet.com. I must admit I have committed quite a few of these mistakes :( like the author.

* Fighting Mr. Market. There's nothing worse than trading a trend in a choppy market or sideways choppiness in a trending market. Make sure you know which one you're jumping into before hitting the enter button.

* Loving the bad. It's hard to admit it when we're wrong. Rather than cutting losses, we try desperately to transform our worst trades from lemons into lemonade. Sooner or later we find out how easy it is to turn a small loss into an absolute disaster.

* Hating the good. Sometimes we know it's a great trade, but only at the subconscious level. For some reason, we can't handle our good fortune and jump out with a small profit. Minutes later it takes off like a rocket ship without us on board.

* Arriving before the show. Seeing a trade is not the same thing as actually trading it. Bad timing forces us into many positions that aren't ready to move. Then we get bored and give up just before they do exactly what we expected them to in the first place.

* Arriving after the show. Read this one closely before it shows you how to become a bagholder. Sit on your hands and watch a great trade roll by because you want to see what everyone else does before you act. Then jump in just as all of those folks are ready to get out.

* Bull fever. You're sure the market will go up after a rally day, so you jump in with guns blazing the next morning. You've forgotten that markets need to shake out weak hands after a big rally before starting the next move. Guess what? You're one of those weak hands.

* Number cramp. You see numbers that don't exist on your trading screen. Worse yet, your fevered brain thinks they're great trades and you start pounding the keyboard to get in. It can take a lot of time to climb out of this mental mineshaft.

* Ignoring gravity. We worried too much about gravity in the 1990s. Now we need to pay much closer attention to it. Stocks will go down when they can't find many buyers, regardless of how few sellers are hanging around at the time.

* Blind to the big picture.You can get into big trouble by forgetting to step back and check out the landscape. Many stocks have to grind through debris left behind by old selloffs. Every one of those red bars hides losers who want to get out at any cost.

* Hooked on polarity. The diabolical market will manipulate your heartstrings at every turn if you let it. Invariably you'll be afraid when it's selling off and downright giddy when it's going up. This means the trade that follows your emotions is likely to be a big mistake

Weak monsoon ?

Concerns about monsoon are being voiced already. Business Standard reports

The news of a 60 per cent chance of a weak El Nino developing in early 2005, is surely not welcome, given the possibility that this presages a below-normal monsoon next year as well. However, concern at this stage may be premature.

More information at Monsoon Warning

Deadpresident's Valuepicks

Jammu and Kashmir Bank - Hasn't run up like its private bank peers. Trading at very low p/e of 4.19. CMP - 351. Accumulate before it zooms.

Disclosure : I own Jammu and Kashmir Bank Stocks

Avaya Globalconnect

Has had its fall ! Now is the time to rise. Very impressive list of clientele. Telecom sector booming. This stock will perform now. Trading at a very low p/e for a telecom company. More at Avaya GlobalConnect

Disclosure : I dont own any stocks of Avaya GlobalConnect. Will buy it in the coming week.

Way2Wealth

Here is a nice site Way2Wealth- Its portfolio tracker is impressive and also has the latest news about each company that you have in your portfolio

Banks - Gung ho about it ?

Bank stocks have run up quite a bit now. From being untouchable 2 months back to everyone's favourite now. Here are a view why you should not invest in banks even now Equitymaster

Low Priced Stocks ?

Always tempting ! The scope penny and low price stocks offer for appreciation is tempting for most traders and investors. Business Today, in November, came out with a interesting article on 10 stocks under 50. Here is the 4 of the 10 that I like. With it is the Business-Today description of the stock

# Ashok Leyland

This truck maker is a big company with a Re 1 face value share (the minimum allowed). With commercial vehicles in increased demand because of India's industrial spurt, it is expected to turn in a performance even stronger than that of 2003-04. "Ashok Leyland is not expensive in relation to its earnings," says Rajeev Thakkar, Head of Research at Parag Parikh Financial Advisory Services. Interest rate and oil price rises, though, could hurt.

# Shanthi Gears

Another stock with strong potential. This Coimbatore-based company, reputed for industrial gears (which includes boxes, motors and assemblies), caters to a wide range of industries, from steel and cement to chemicals and textiles. "The management of Shanthi Gears is rightly expanding its capacities to leverage its pre-eminent position and brand image to capture the revival in its user industries," says S. Ranganathan, an auto analyst with LKP Research.

# Deepak Fertilisers & Petrochemicals

This has been a victim of misperception. It is treated just as a fertiliser company, and gets clubbed by analysts as such, though it is getting a fast increasing share of revenues from its chemicals business. Further, it is a consistent dividend-paying company, and can boast a yield of more than 5 per cent.


# Lakshmi Precision Screws

A cyclical gainer. In the rush for automotive fasteners, investors ignored industrial fasteners (hence its low p/e multiple). But the expected industrial recovery in India, together with its increased focus on exports (38 per cent of revenues for the year ending March 2004), could see this firm stage a resurgence


Disclosure: I dont own any of the stocks listed above. I will probably buy Ashok Leyland very shortly

Broker houses' recommendations

Of the few stock broker houses' recommendations that I have access to, I find Sharekhan, HDFC sec to be more researched. They have good 'hit-miss' ratios. Both of them publish their recommendations for public and not just their subscribers. Maybe you people want to have a look at them. Any other good broker house recos ? Comment please !

Business Line

Recommendations ? You seen them all ? One of the sites which caught my eye is the Hindu Business Line, the site isn't the best to look at in terms of appearance, but makes up with quality content. Their stock recommendations are based on some good research. Check it out !

Dead President's ValuePicks

Munjal Showa is one of the largest makers of Shock Absorbers. Rated very highly for its unparalled quality, it has a number of big clients. Some of its clients include

# Maruti Udyog Limited
# Honda-Siel Cars India Limited
# Honda Motorcycles and Scooters India (Pvt) Limited
# Hero Honda Motors Limited
# Bajaj Auto Limited
# Kinetic Motor Co. Limited
# Hero Motors Ltd.
# Majestic Auto Limited

More about the company at Munjal Showa

The stock is lingering at 200 levels for quite some time and trading at a atrociously low p/e of 7. Watch out for a breakout anytime. One of the few auto-ancillary companies which hasn't participated in the rally. There are outsourcing opportunities in the future as well.

The CMP is 210.

Disclosure: I hold a few stocks of Munjal Showa

Systematic Investment

Well, I never have done any systematic investement plan yet. But I realized, its a simple and a damn effective way of making money in the stock market. When I started off a year back, came in on the back of a huge bull market and rightly so, fell into it and invested in a Mutual Fund called ING Nifty Plus (a index fund). In 4 months, I was at a loss of more than 25% and now my returns from that fund are about 5%. If I had invested about a 1000 bucks every month, according to my calculations, would have made about 18% till now. Realizations come late, but I am now planning to invest in Franklin Prima Index Fund

Here is a link on Systematic Investment