Thread by @MashraniVivek

Lessons of bull market....thinking to create a thread where I will keep posting on euphoria phase we all had been into.

No offense to anyone, we all are human and we make mistakes, just for serious learning.

1st one - euphoria on housing finance

(1/n)
rakesh-jhunjhunwala.in/after-dolly-kh…

Second: Quest of multi-baggers in microcaps in 2017.....even after fall people had contrarian views that this space will bounce back...

(2/n)

rakesh-jhunjhunwala.in/24-micro-cap-m…

This just a snapshot of kind of value destruction that has happened in microcap space...

Source: @screener_in

(3/n)

If this was not enough, we saw extreme euphoria in SME segment. Many bulge bracket institutions jumped-in without caring about multiples, liquidity and exit strategies. Many SME-only advisors and IPO facilitators emerged during this time..

(4/n)

economictimes.indiatimes.com/markets/stocks…

Then we had phase of infra push....dreams of 100 smart cities, bharat mala project, bullett train, metro trains, etc. which created euphoria for infra stocks

We forgot about sector dynamics, profitability, bureaucracy, black money etc. and jumped

(5/n)

m.economictimes.com/wealth/invest/…

NBFC was kind of favourite and probably still is. Even after IL&FS crisis, people thought "all is well" n forgot about leverage and concentration risks....only to see some low ranked NBFCs going down 90-100% from peak...

Some other risks are still playing out..

(6/n)

After demonetization we had faith in clean-up..."Chor Bane Mor" theme where investors thought all thieves promoters will turn to saints...only to realise that they did lot of marketing, hired IR firms to sell promoter stake at peak through QIP etc.

(7/n)

m.economictimes.com/markets/stocks…

Briefly in 2017, we had selective cyclicals + Graphite story, which were flying high...likes of Rain Industries, HEG, Graphite India, Himadri, BEPL etc. which shooted up 2x-10x in no time...

People thought money making is so easy...n many still sitting without exit plans

(8/n)

Summary so far:

(a) Have exit plan in place, know the risks and have objectivity to acknowledge if risks plays out

(b) Leverage + concentration: double edged sword...play carefully, know risks, avoid if possible

(c) Don't pre-empt promoter quality, look for signs

(9/n)

(d) Entry and exits extremely important in microcaps n cyclicals, don't get carried away, have exit plans n stop losses in place

(e) Diversification is extremely important.

(f) Stick to asset allocation, don't deviate even though money making looks easy

(10/n)

(g) Understanding of liquidity risks is very important..

(h) Know your risk appetite before entering into something

(I) Nobody is full-proof, media and fellow investors most likely are as soaked into euphoria as you are; Try to cut noise. Go back to basics. Read history

(11/n)

Some more learnings and actionables listed below....

(12/n)

bit.ly/3bG3q45