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The Equitymaster Research Digest

Confusing Signals, a Flood of Recommendations, and More...
Mar 11, 2016

I want to talk about ambiguity today. A subscriber is wondering how come we can be prophets of doom and endorsers of stocks at the same time.

Some of our editors paint a gloomy picture about the global economy. Yet we continue to come out with stock recommendations. Is this a case of one hand not knowing what the other is doing? Or is there a logic to it?

Out of your comfort zone

I am reminded of a folksy quote from Warren Buffett back in 2008. He was giving advice to people waiting for the perfect buying opportunity: 'If you wait for robins, spring will well be over.'

The number one mistake people make while investing in stocks is to wait for a storm to pass. This can be a useful strategy in other areas of life, but it can hand you lemons in the field of investing. It is a fact of investing that bear market bottoms can be seen only with the luxury of hindsight.

Therefore, any opportunity to buy a stock at a discount to its long-term intrinsic value should be taken irrespective of the macro picture.

Do understand that over the long term, the stock market news will be good. In the last thirty odd years, India has endured the balance of payments crisis, unstable governments, droughts, scams, and many other adverse events. And yet, the Sensex has risen from 100 in 1979-80 to around 25,000 today, a 250-fold increase.

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