BEAT the market with these three factors

Agilent
I am not throwing out or grabbing in anything. All I am saying is that 'value' is simply not abt analyzing balance sheets.There is much more to markets than that. And certainly markets dont move around just the balance sheets .Markets do not work in a vaccum.


CV

Perception of what? Perceptions don't arise from thin air? What do they arise from then?
You have yourself provided the answers my friends (and very good answers too for a disbeliever in Fundamentals!)

Exactly! And what are these? They are nothing but the Macroeconomic Fundamentals. You have even been perceptive enough not to limit yourself to the domestic economy alone but also include global factors, which is very true in today's globalized economic scenario.

Economic Fundamentals have the following hierarchy :

ECONOMY (domestic as well as it's global linkages) -> Sectors (including agriculture) -> Companies

& the markets encompass & reflect all of these. And when you look at the entire picture balance sheet of a particular company is only a small part of it What about the sector, one may ask, is the sector strong? What about the economy Is the economy doing well? (In fact the economic fundamentals is the first thing an FII is going to look into before putting his money in Indian mkts long before delving into sectors & companies; and it's not just about the present but the future as well In fact what he'll look into is whether the country has embarked upon a new economic growth cycle). So indeed as you say the mkt is not just simply about balance-sheets.

So you see if you buy during a strong economic growth cycle into a strong sector and a strong company (this is where the balance sheet bullshit becomes important!) within the sector then you can hardly go wrong (& to hell with those Stop Losses!).It would also help if you can get in at the early part of the cycle (or during corrections within the cycle) when the valuations are cheaper i.e. the prices haven't run ahead of the Fundamentals When all the good news is still not factored in. This will increase your gains.
This is how long term value investors invest.

The boom & bust cycle of the mkts actually reflect the underlying Economic Cycles This is a vast subject Part of Economic Theory and well beyond the purview of a forum. But given your familiarity of charts you must have observed that nothing moves in a straight line and nor forever in the same direction You always have those little saw-tooths those ups & downs even when the main trend is up and then a time comes when the main trend reverses & starts moving down. Same happens to economies due to various factors. They progress in cycles. (Actually the May correction wasn't all that bad 'cos it hasn't changed the main trend which is still up It was just that we had deviated too far from the mean of the trend & reverted back to the mean).

I'll dwell on these a bit more when i find the time but Fundamentals is a huge subject (stock fundamentals or balance sheets, PE etc. are only one aspect of it).

Regards,
kalyan.

You have outperformers in both directions During a rise some stocks will move up more and during a fall some stocks will fall less. Needn't necessarily be the same stocks though. The sectoral outlook (or what CV calls perception & i call Fundamentals) might have changed by the time the mkt reversal takes place (take sugar as a recent example The demand-supply picture of sugar has completely reversed in the last 3 months & you'll find that reflected in the d-s scenario of the stocks. Of course it's a short term view and markets do overreact both ways leading to overvaluation & undervaluation).

Regards,
Kalyan.

And by the way all said & done i too am nothing more than a small time trader and as such do not disregard my charts at all & love my leading indicators as they help me spot potential trades early.
So i'm not a part of any typical techno-fundoo debate.
But i do try to remember that i'm buying into a company after all and as such into its profits&losses it's assets&liabilities. I also try to gauge it's future prospects over the next year or so The near term sector outlook And last but not the least it's valuation (that tells how much of an upmove i can expect from here Whether it's already too expensive). Doesn't harm to do a bit of thinking does it? 'Look before you leap' originated from where - Esop's fables or was it's CVs thread or CV HIMSELF??
And it's somewhat more important to me because i do take some liberties in my trading. I'm not what you'd call a 'disciplined trader' Like i'm not a stickler for stop losses. I seldom use an entry stop Rather allow my stock to swing around a bit if it will, throw out the weaker hands before making that jump. Do use trailing stops though (because you never know when the FIIs start finding Brazil more atrractive than India or Osama decides to have some fun & bombs the White House!) But most of the time I put one in place only after a 10-15% gain If it comes down before that i simply hold on. My Fundoos provide the confidence & insurance to hold on. (Haven't been 'slaughtered' as yet; maybe just a lucky sheep so far!)

Regards,
Kalyan.

P.S. : And pure Technical Trading is very much possible & profitable if you do it right. I just try to mix in a bit of fundamentals to (hopefully) compensate for my indiscipline!

What a profound statement! Would you believe lohiya this guy doesn't believe in fundamentals?!!

I've seen stocks trading in a congested zone for 6-7 months... then spurt up as much as 300%.. then go back to previous levels again.. thought all that play was coz of 'perception of market participants'; called 'Operator' in layman's language: gang of promoters, HNV's, funds etc. Ya I c that one can describe such behaviour by 'fundamentals' alone.. and charts have nothing to do with it. Ohh I thought that for a crash there needs to be created euphoria.. I was ignorant about FA valuation ...wonder why horse betting is associated with the mrkts (http://www.traderji.com/technical-an...eculation.html)

ya i c that the May correction was gud... it brought down some stocks like hell and they continue to trade at same levels... guess the fundamental of those companies were changed during the crash(span of some days). People keep asking me that they bought shares of a company after gud results then why did it came down
Many friends asked me wether to buy sugar stocks when they spurted up last friday by as much as 17%.. I posted a chart on my blog for them. damn! why does it works!
I like da dude's writing style
wen did I say this guy does not believes in fundamentals?!!


PS: I am also not throwing or grabbing anything hail FA!

Ya such manipulations do happen (This is also something Fundamentals protect you from while Technicals don't - both the blatant and not-so-blatant manipulations) I have seen more 'sheep' get 'slaughtered' by buying into penny stocks with no Fundamentals but great Technicals! (i've seen stocks quoting below their face value being designated as 'hot tips' Fundoos tell me don't touch even with a l-o-n-g pole no matter how good the technos look)

But i may also add here that periods of consolidation is also natural (both for stocks as well as mkts when the techhies say the stock or mkt is 'ranging') These are periods when the weak hands sell out while smart money accumulates (buying in small lots so that prices don't shoot up) Once the supply stops the continuing demand drive prices up. Everytime you see such a consolidation pattern you wonder which way the stock would go from hereon (i.e. breakout or breakdown from the 'rectangle', 'triangle', 'wedge' or whatever else figures in techie parlance) Here i've found fundamentals can provide a clue If the fundamentals remains good the stk is likely to breakout rather than breakdown (in fact i've noticed longer the period of accumulation better, more flying the breakout) I can cite Jain Irrigation as a recent example (where i was recently stopped out at 470) Didn't do much for a long time ranging between 230-250 but i was confident of a breakout based on my fundoos and when it did breakout ...

BTW i came across an excellent article on horse-betting in this forum (don't remember who posted it). But the essence of the article was since the majority loose money in horse-betting then to be a winner BET AGAINST THE MAJORITY i.e. go against what the majority thinks is right & you'll make money! Such contrarion style of investing do exist in stk mkts Why now you even have Contra funds! (Sugar can be a good contrarion bet at this juncture as the long term picture remains good; so one can take advantage of the short term bearishness and buy at better values I have an eye on Shakthi Sugar as it also has an alternate Auto comps biz with good cash flows Provides a Fundamental hedge Also they have recently raised fresh money Means high int debt will go down & the reduced int outgo will add to the company's bottomline Now where are my charts ...)

Agreed that in the short term markets do behave in an irrational manner more often than not But in the long run it does give each one what they deserve Overvalued stocks (ahead of their Fundamentals) move down while the undervalued lot moves up (same for the mkt as a whole Overheated mkts cool down & vice versa) This is the beauty of the markets - the order in the apparent chaos, the harmony in the apparent disharmony Those who fail to read it go either or
The undervaluation is actually an opportunity for value investors to buy. I bought KEI Inds for 290 (deemed myself lucky to get such a fundamentally sound stock at such a throwaway price) Has moved up Still hoding Have a target of 600+. Same story for MICRO TECH.

The negative outlook in sugar is a short term one The long term fundamentals still haven't detiriorated specially when you consider the ethanol story (India has the potential of becoming the world's 2nd largest ethanol exporter after Brazil only if the govt allows it) I guess the short term punters are also betting on the ethanol story So you have these spurts in sugar stocks everytime oil prices move up Still my fundoos tell me don't buy into a sector where the near term sectoral outlook remains hazy (& worse, dependent on the policies of a populist govt).
Recently my fundoos have also been pricking me about IT stocks & other export oriented sectors given the depreciating dollar (it's telling me that the 'perceptions' of CV & his ilk may soon change! ) It's urging me to get into more domestic-demand driven sectors. I know i can't ignore it's nagging for long (for my own good).

Thanks. I wish i could develop the casual, matter-of-fact style of the Motley-Fool website.

Oh come on lohiya ... I need your help in facing CVs vociferous attacks (he's so good with words!)

That's the bottomline If you don't believe in Fundoos So be it No big deal Just learn your Technos well & you'll do better than mere survival I just believe in keeping those windows open (great fan of Tagore & nothing to do with being a Bongo!)

By the way don't know how ethical (even if legal) it is to keep advertising your private Blog in a public forum Leaving that to your conscience & good sense. No offence friend.

Regards,
Kalyan.

I simply dont have any energy to argue about all this anymore.The views you subscribe to are very prevalent in the investing industry and thats what causes all the inefficiencies to be captured by some of us.Instead of reading Graham and Dodd plz consider Alchemy of Finance by Soros ( a practitioner rather than an arm chair theorists) You will know what I mean by perception and reality.Being an engineer I am more pragmatic about things instead of belonging to a cult.

And its neither illegal or unethical to post personal blog links on a public board.Where do you cook up all this?


CV

I'm glad you said that I don't have the energy either nor the time Need to spend more time with the charts... tighten those Stop Losses... with the market behaving as it is.

Perceptions stem from reality but often overshoot it. That is my own 'perception' though, not one derived from some authoratative tome. One needs to have ones own mind (& an open mind) to learn from those tomes, to distill the essence and distinguish between them Otherwise you run the risk of falling prisoner to a (thought) cult.

Seems crude to me to quote ones profession to assert oneself. I prefer not to. Logic & reasoning should be enough. And if you had the right 'perception' of my posts you'd know i don't belong to any 'cult'. I was deliberately stressing the Fundamentals aspect as this is a FA thread.

Thanks Didn't know that. That settles it then. Sorry lohiya.

Regards,
Kalyan.

investor.....
all depends on his perspective.....
not to get panic when the prices come down....
all depends the time frame he choses to hold the stock......
its always love and enjoy the stock not to marry with it.........
any one who enters the market must learn from a dog....know the mood of the master and behave accordingly....then only one can be happy.......
If i am wrong in my comparison...... i may be forgiven.....
but its a fact.......
is int it ?
rbs