False Complexity

 Unlike my previous blogs for giving forecast of coming weeks on different industry sector. You will find this blog in different taste and references. I will emphasize more on the learning part of stock market. As a general though for the blog,

I want to emphasise that a simple subject like this is made complex due to hidden agenda from most of the knowledgeable crowd. Further to add on this, As a concept it is as simple as shopping for jeans or other stuff in super market. Read the below explanation in the context.

When we think of buying a jeans, shirt or a pen and visit a super market. First thing we focus on the quality of goods, respective price and budget we carry to the market. When we look for quality/price of goods we compare among same category of different brand in stock. We don't compare jeans quality with pen or jeans price with pen price. If one brand of jeans is too costly, we check the respective quality and brand value when you wear the jeans. Similarly if one brand of pen is too cheap, we check for quality and our usefulness of the same. Based on these analysis if we find that price paid is worth buying, we buy the stuff based on our budget. Sometime we check quality/ Price of goods and even if it is ok to buy we don't buy but wait for the discount season. Discount season brings the cost down of the same quality product.

Normally we do these analysis so quick in our mind that we don't even notice that we are analysing something before buying.

File Pic - Super market Vs Stock Market

Now with similar analogue we will analyse the buying in stock market scenario. Different category of goods like jeans and pen is similar to industry sectors in stock market. Industry sectors are the category of similar businesses like Pharma, IT, Power, Metal, mining, power, oil and gas etc. When we think of buying stock of any industry sector, we need to analyse quality and cost of shares as we have done in super market. When we are comparing the quality and cost, we compare within the industry sector and decide. There may be different ways to analyse quality and cost. But end result is to find whether the stock price is worth paying the money. Sometime we track the price of shares but wait for the discount season to start.

Unlike super market Discount season in share market does not come on pre-announced date. It comes unusual way to the buyer either like independent issues in the company or overall negativity in the market. The trick here is to stay positive and excited to buy in overall negativity in the market as we show in discount season in super market. Negativity in the market is like discount season of stock market.

Unusual discount season comes when there is sudden turbulent in the normal business. To quote example from the recent history like FDA ban on nestle product maggi (May 2015). In this case nestle stock price was down by more than 20 %. USFDA ban on Pharma industry provided such discount opportunities in all pharma companies. The day Vishal Sikka resigned from infosys, stock was trading at 52 week low price. It was a Big opportunity for buyer to get the quality stock at discounted price. Individual quarter results also provide such opportunities to buyer. As a buyer we should know that these issues are discount on prices or some serious long term problems.

Concluding this with the saying that 'Stock market is complex if you focus on noise and simple if you hear your internal voice'.