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Dear ivestors, Its Selling Time (Have patience to read it)

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Member
Registered: Aug 2013
Posts: 40
Stock market is very complex to theorizes. In countries like our's where most of the investors invest in a share without looking financial health and management vision of the company they are investing on can be presumably
categorized by those driven from following investment theory.

Greater Fool Theory

The greater fool theory proposes that you can profit from investing as long as there is a greater fool than yourself to buy the investment at a higher price. This means that you could make money from an overpriced stock as long as someone else is willing to pay more to buy it from you.

such investors risks of greater loss if market correction takes place immediately after they made any investment on overpriced shares.

As Seedmoney ji has pointed out one investors can only be benefited from the loss of other investors. And most naive investors will buy share if every one is buying (bullish state)and hurries to sell shares if the price is dropping(bearish state).

Since most of the times its hard to get benefited from big investors, those who want to make money in share market must make small and naive investors as there pray. And to make good money you need a lot of small investors to loose money. So don't flow with tide. Its uncertain where the tide will left you.. at shore or at the middle of the sea.

As prayas ji has quoted Warren Buffet saying " I do not have any sophisticated strategies. I sell when people are in a buying frenzy; and I start buying when market panics and people start selling". You can swim wherever you want if you learn to swim against the tide. After all its easy to sell in good price when demand is high (most of the investors are buying) and easy to buy at lower price when supply (most of the investors are selling) is high. But remember one should not swim in every sea(every company)
Member
Registered: Jul 2013
Posts: 89
Thirdeye!!

If one investor suffer loss, its universal that other got benefited.. Now many are making bucks selling or disposing investments. Then who is in loss..??? Investor holding investment and acquiring now..
Member
Registered: Jul 2013
Posts: 986
logic and facts do not seem to work here. it is the whim led by smart guys that swepts all. investors are following general move in stock, real state. smarter one make money and run away but general followers get caught in loss making cycle.
Member
Registered: Aug 2013
Posts: 1
Dear seed money ji
i tried to calculate the share price of pcbl using the formula you stated above but i simply could make any progress...could you please simplify it and hopefully calculate the market price for pcbl....i would really like to learn what you were trying to do up in that example...thankyou
Member
Registered: Jul 2013
Posts: 64
Thank you very much
Member
Registered: Jul 2013
Posts: 89
Dear Super5 Ji,

I can't say which company share can be sold and which company share to be acquired..

YOu can make analysis out of your own.. My simple logic is as below

Presently the Bank Rate is 8% as per NRB.. Any Commercial Bank will give u 8% interest on 1yr FD. Just check out the 1 year FD interest rate of the bank you want to analyse.

Apply formula = 100/8%. (FD RATE)

Lets say the number come is "12.5" for the sake of simplicity

Add Growth percentage. For example if XYZ bank has made growth on profit by 30%. then growth on the number we calculated is 12.5+30% of 12.5= 16.25

Find out the EPS of the company as per the published report. multiply EPS with the number we calculated above. This is the share price as per my calculation..

If the market quoted price is more than the calculated price, sale it.. if the market quoted price is less acquire it..
Member
Registered: Jul 2013
Posts: 203
That is a difficult question.....tomorrow is uncertain and every investor is unique.....You might not like what i like......

Its better you decide yourself.....
Simple things are:-
One who has no patience wont do good
One who is too greedy wont do good either
One who doesnt do proper research/study wont do good as well....

What happens most of the times is REGRET...
In selling situation:--
We sell it and the price goes up and we regret.
We hold it and the price falls and we regret....

In buying:--
We wait and price goes up....we buy and price falls....there is too much regret....

best is to book the profit without any more additional greed and feel good.....
Buy a good stock when it is low and wait.....dont do too much calculations...
.there are people always who are making more money then us ...dont compare....
You move in your own pace.....
Make some gain and feel good....repeat it ....dont hurry

Thanks.
« Last edit by BiG BuLL on Mon Aug 05, 2013 8:16 am. »
Member
Registered: Jul 2013
Posts: 64
Would you please kindly suggest me which company share I should sale to gain better profit and which one has to be hold one?
Member
Registered: Jul 2013
Posts: 203
As warren buffet quoted-''what wise do in the beginning, fools do in the end''.

The truth is that a stable investor makes money all the time...whether it is bull, bear or lock situation....trend is just his friend....

They say market is a place with people knowing price of everything but value of nothing......
They also say ignore the herd and you will beat the market....
If you follow the strategies of great investors you will make money....it doesnt work all the time but does at most times....

Choice is yours.....
Member
Registered: Jul 2013
Posts: 89
BiG BuLL Ji,

The ultimate beneficiary of the share market is Key market player holding substantial market capitalization who control share price and the brokers. The Funny thing is both of them are same person.

The ultimate loser is the innocent buyer or investor like us. Our psychology is to buy share when market is moving up to make shortcut money. We don't know that the big player are releasing the holding in market making it bullish. We wont buy in the begining days but only at saturation, its our psychology. When key market player release the holding, they will make the market move down. In the initial days our psychology doesn't allow us to sell in loss. But when the market is down to lowest point, we will dispose it because of cash crunch. Key player make bucks from commission and capital gain as well.

Isn't it true"????
Member
Registered: Jul 2013
Posts: 203
U r right seed money ji......
The market follows the mass psychology more than the financial indicators...
Most stocks are overvalued.....look at commercial banks....look at insurance companies...they are heavily overpriced....
I have been saying this many times but nobody listens.....instead they start teaching.....the beauty of the market is everyone thinks he is an expert no matte how dumb he is....
That is really good for investors like me.....because ultimately their loss will go to the pockets of an smart investor....
This year i invested in microfinance companies rather then the commercial banks and hydros......and my value has appreciated....
Last year i went for the insurance companies.....

I have my own way of investing......i have my own strategies.....the strategy i use the most is---
''Buy the undervalued, sell the overvalued'' and it really works...


You are right but nobody listens.....
Member
Registered: Jul 2013
Posts: 89
Dear Bici

ts just a fluke..
Member
Registered: Jun 2013
Posts: 1
great analysis seedmoney ji.....however 13% in 25 days without any analysis? what u say?
Member
Registered: Jul 2013
Posts: 89
Prayas Ji,

Thank you very much for your valuable info... As you said there is no straight formula to predict the share price it is definitely the market (Buyers and Seller) determine the price. But is it prudent to rely upon the price where the hold in market is within few players.. Its not the market, but those players determine the market.. Market is not homogenous and volatile.. There is hardly 4-5 transaction of a company in a day. Look into BSE (Bombay Stock Exchange) There are thousands of transactions of a company in a second..
« Last edit by BiG BuLL on Sun Aug 04, 2013 5:02 pm. »
Member
Registered: Jul 2013
Posts: 30
माथि को post को भावानुबाद

Seedmoney जी सित धेरै सहमत छु । र केहि कुरा थप्न चाहन्छु ।

तपाई ले उल्लेख गर्नु भएका र अन्य गणितीय model हरु थाहा पाई राखेर त केहि बिग्रिदैन तर ती मोडेल हरु वास्तविक जीवन मा share किनबेच गर्न को लागि कति उपयोगी छन् वा छैनन् भनेर चाही मतैक्य कहिले हुदैन । बिशेशग्य हरु येस्ता नया model हरु ल्याउदै गर्छन किन भने येति नगरी उनीहरु को चुल्हो बल्दैन , र उपभोक्ता हरु share किनबेच गरि नै रहन्छन, ती model को बारे मा थाहा भए पनि र नभए पनि । तेस्ता model हरु मा धेरै assumption हरु पनि अनुमान गरिएका हुन्छन (जस्तै सूचना को समान प्रबाह ) र ती अनुमान हरु बिकसित देश मा पनि सहि हुन गारो हुञ्छ भने हाम्रो जस्तो कमजोर संरचना भएको देश मा त कतिपय अनुमान सहि साबित हुदै हुदैन ।
अब तेसो भए share किनबेच गर्ने मामिला मा market मा अधिकांश ले के गरिराखेका छन् त्यहि अनुसार आफु पनि चल्ने की ? तर गणेश ले दुध खाएको घटना र ऋतिक रोशन काण्ड समझदा येसो गर्नु पनि उपयुक्त नहोला । भन्ने हरुले त हावा नचली पात हल्लिदैन पनि भन्लान, तर हात्ती ले रुख मा गएर ढाड चिलायो भने हावा नलागे पनि पात चल्छ ।
माथिका कुरा सुनेर द्विविधा हुनु स्वाभाविक हो । त्यसैले Warren Buffet ले भनेको कुरा स्मरण गर्न चाहन्छु : "लगानी गर्ने मामला मा मेरो त्यस्तो कुनै तगडा रणनीति छैन । जब आम मान्छे share किन्न तछाड मछाड गर्छन (बुझौ: nepse हरियाली हुन्छ), म बेच्न थाल्छु । जब market आतंकित हुन्छ र आम जनता डराएर बेच्न थाल्चन (बुझौ: nepse लाल हुन्छ), अनि म किन्न थाल्छु ।" यो कुरा लगानीकर्ता, बिसेष गरि नया लगानीकर्ता, ले बुझे धेरै राम्रो ।
Member
Registered: Jul 2013
Posts: 30
(English ma lekheko ma kasaile jharko namannu hola. Aawashyak bhaye Nepali anubaad pachi kunai bela rakhne chhu.)

Seedmoney jee,
I agree with you a lot.

Regarding the models you have discussed, they may be sound from academic viewpoint but all of those models contain certain assumptions which may not hold true in real life. Still academicians keep on coming up with new models and calculations - after all this is their bread and butter ;) - but investors and traders keep on doing what they do best' I.e buy and sell. Basically, in a not-very transparant economy like ours, where big players tend to have access to insider's info quite easily, it's very easy for a layman's view to be influenced by what the crowd is doing ( e.g ritik roshan kanda, ganesh le dudh khayeko kanda etc and this applies to equity market as well). So, in short, you can not trust the mathematical models on one hand (due to lack of credible monitoring authority in all sectors) and on the other hand, it may also be risky to flow with the crowd as they may be being swayed by what is called 'herding mentality' (read ganesh le dudh khayeko kanda , again :) .

Now the million dollar question is what do we do then? I find it relevant share that once warren buffet said something along the lines of " I do not have any sophisticated strategies. I sell when ppeople are in a buying frenzy; and I start buying when market panicks and people start selling". Investors, especially new ones, should be aware of this.
Member
Registered: Jul 2013
Posts: 89
Dear Investors’

Many of my friend circle talk on Investment on shares these days and many made big bucks in a span of few months and some in few weeks. It impulsed me to monitor the market movement closely. I am watching it since 1 months. When I was following the market, it was bullish. After observing 7 days, I picked up 5 Commercial Bank. I am a just retired salaried person, I invested my retirement encashment of 2 million equally on these five companies and didn’t tracked it for 25 days but started studying the Financial Statements of my portfolio companies. I deeply studied share valuation methodologies in internet. I ended up with following conclusions in first 7 days

1. Non of my company assured 5 % pa of cash return as dividend on my investment amount.
2. The net worth per share of the company has big mismatch with the price I invested.
3. Forget about Cash dividend, EPS of some companies are not even 5% of price I invested.

I wondered, why the hell share price has been this. I started studying the previous year financial statements and market news of the company, I invested. I studied the Balance Sheet in deep, whether the intrinsic value is higher. Is there any immovable property which is booked at historical cost, any investment which has been appreciated heavily. I recalculated but still there is big gap in price. I started following investment related sites, chat with friends having huge portfolio. Then, one of my friend told, “Shareprice doesn’t depend only on financial statements of company, there are many other variables/factors which affect share price”. I wondered, how come this idiot who belongs to Arts faculty, studied with my elder sister and passed SLC along with my younger brother knows these stuffs. I curiously asked what other factors are?. He replied, “It will not come into your knowledge just in 3 weeks history in sharemarket”. He paused and started, “It could be Liquidity in market, remittance flow, Forex, Inflation rate, Government Policies, Political Stability etc etc.

Then, I learned about other models of share valuation. I learned about Growth Model of Share Valuation. Nowadays bank has making news with 30% to 100% increase in growth of profit. But I am damn sure that neither they assure same growth in dividend nor same growth in year ahead. It was very strange, business has not grown to that level but profit has been increased. “What could be the reason behind it?”, came to my mind. Oh! There was huge fall down on cost of fund and high growing company has recovered bad loan too. The old lendings giving good yield are being repaid and bank are lending at low rate. Because of which, first half of fiscal year was having good return than second half. This growth is short term. If at all you consider 25% of growth also, calculated share price don’t tune to the market price. Till when they will they grow? Afterall, there is ceiling of capital adequacy. If at all they provide bonus share instead of cash dividend, what is the use of investment that doesn’t yield cash. I approached Price earning model of share valuation. The company which was having 8 times PE ratio a year back is having 18 times now. I couldn’t rely on it. I approached Risk based share valuation. Still share price I invested in twice I calculated. I couldn’t satisfy myself.

After 25 days, I became very curious about my portfolio position. There is a handsome return on my investment to the tune of 13% in a span of 25 days. I was very happy and excited, but couldn’t take chance. I sold my investment and encashed my seed money. My return of 13% i.e 2.6 lakh is still in market. Let’s see, how market will move in days ahead.

Dear friend, Newyork Stock Exchange has not gained till now the same point that it was having in 1999 in the span of 14 years. NASDAQ was down by 42.7% in the year of 2008 and has a growth of 2.7% in the year of 2011. Any investor expect the return atleast to the tune of inflation rate. Recognise the market, it’s the selling time. If it starts decreasing, its hard to dispose the investment in initial days and you will end up disposing at minimum point.

Generously comment me if my prediction is illogical..

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