|»5 Minute Wrap Up by Equitymaster|
On This Day - 2 SEPTEMBER 2017
A Stock Detective Shows You How to Pick Winners
I want to start today with a confession...
It's one that, for some dear readers, will put me in league with a common criminal...
I hate fiction.
I just don't like the idea of making up things. I prefer to live in the real world.
But wait a minute...
Before you go and lock me up, I do love and admire one fictional character.
He's got all the ingredients of a smart stock picker.
Consider this classic line:
'When you have eliminated the impossible, whatever remains, however improbable, must be the truth.'
Do you remember this trademark phrase from the greatest fictional detective of all time?
Sherlock Holmes practises what we'd today call mindfulness. It means focusing on only one problem at a time.
And he makes a habit of observing rather than just seeing. He seeks patterns of probable truth.
Every mystery comes with different challenges. The only thing common to each case is the 'criminal element'. But Sherlock has trained his mind to seek patterns common to all criminals.
He knows the right questions to ask and the right places to look for clues. His methods help him correlate the patterns and behaviour common to all criminals.
Let me be clear about something: Investors are detectives. Every company is a different mystery to solve. Investors need to know the right questions to ask, and they must train their minds to seek out patterns common to all companies.
Super Investor Professor Sanjay Bakshi is the financial version of Sherlock Holmes. He's a pattern seeker, and in his work as a teacher, he trains investors to spot patterns common across businesses.
For Holmes, the 'criminal element' is common across cases. For investors, the common element is 'management'.
Consider this trademark line from Professor Sanjay Bakshi:
'I am a pattern seeker. I seek success patterns and avoid failure patterns.'
For the professor, the biggest enabler for any business is the management. And he always prefers owner-operators over career managers. He believes...
The Smart Money Secrets team are also pattern seekers. The entire structure around which the service was built helps us spot patterns better than anybody in the game.
Our proprietary filtering tool, the Smart Money ScoreTM (subscription Required), is like having our own private detective always on the case looking for clues to uncover the 'management element'.
The tool not only accounts for success patterns; it takes care of failure patterns.
To give you one example how it works, one of our top recommendations of Smart Money Secrets came from identifying patterns. I read an interview of the management of the company in a business magazine.
This owner-operator was talking about prudent capital allocation, the importance of return on capital employed, and how he has created a niche for his business in an otherwise competitive market.
I got what I call the 'Holmes alert' - a little tingle in my moustache that seems to indicate a good idea.
The ideas he was talking about were clues that told me I'd spotted a success pattern.
Not surprisingly, when I checked the company in detail I found that it scored high on our Smart Money Score system.
And when I learned Super Investors Anil Kumar Goel and Vijay Kedia sensed these same patterns too, I knew we were on the trail of something big.
Smart Money Secrets is still a new service, but we've already recommended four stocks, and all four companies are run by owner-operators. And all four score highly on the Smart Money Score.
In fact, my detective work has led to this company being our next recommendation. I am releasing this recommendation ahead of schedule so our readers can get in early.
Editor's Note: When Kunal solves the mystery of the stock market, his readers reap serious profits. He has just opened his service up and will be accepting subscribers for a short time only. If you are not on the list of this stock market detective, sign up for it now.
03:00 Chart of the Day
Notebandi may have been ineffective in stemming out black money so far but the exercise had a positive impact on household savings. The exercise that invalidated 86% of currency notes in November last year has resulted in more Indian households parking their savings in financial assets. The share of household financial savings in Gross National Domestic Income (GNDI), also known as household financial savings rate, rose from 7.8% in FY16 to 8.1% in FY17.