Came across an interview of @sidd1307 conducted by @varinder_bansal.

The one hour was packed with learning both related to #stockmarkets and daily life.

Below is the thread about key learning which i found important.

Like or retweet if you found it worthwhile.
Intro of Siddharth bhaiya

(a) he has completed CA.

(b) Entered into the stock market in early 2000's as analyst covering FINANCIALS

(c) Currently running Aequitas Investment Consultancy.

(1/n)
Importance of stock market

Human like any other animals, performs 4 core activities in his lifetime;

(a) Searching for food
(b) Protecting themselves from enemy
(c) Occupy territory
(d) Sex/mating

In modern world, all these activities are dependent on money.
(2/n)
If you have money, you will have good home, food, marriage life etc.

The source of money is Stock markets and if we made any investing mistake our core activities will be impacted.

(3/n)
Siddharth’s #StockMarket philosophy

(1) You need at-least 10 years to understand stock market.

It is the place where skill matters.

In markets you will see both types of people; the people who have earned crores and people who have lost crores.

(4/n)
To be on the right side, you have to learn from mistakes.

(02) Investing is all about not losing money.

While investing in stocks, focus more on downside and upside will automatically be taken care of.

(5/n)
(03) Stick to core competence

He is more of traditional investor, interested in commodities and traditional business.

(04) Stick to one strategy

Every strategy has drawdowns but you need to stick to the one that suits your personality.

(6/n)
#BehavioralEconomics

Almost all investor read Buffett, Peter Lynch etc., yet only few are successful in stock market.

The reason lies in their #investing behavior

Human brain can be divided into three parts;
(a) Ape brain which does rudimentary work

(7/n)
(b) Mid brain (for emotions)
(c) Rational part

Generally, we do all the task involving our emotional and rational mind.
When our core activities are at risk, the mid and rational part shut off and ape brain took over our mind which cause us to take irrational decision.

(8/n)
Same thing happens during #StockMarket bubble or fall. Here our rational mind takes a back seat and our fearful monkey mind cause us to take bad decision.

(9/n)
How to overcome this?

Greed/Fear are imprinted on our DNA, which cannot be avoided.

Important is to recognize that the brain is playing tricks so that you avoid taking stupid decisions.

(10/n)
@sidd1307 Bull market experience.

(01) First Bull Market 2002-07 (mother of all bull markets)

It was his first bull market. He made some money but not to his full potential.

In his words “ I made small return on small capital”.

(11/n)
In that #BullMarket at-least 1000 stocks went up 100x. You just could have thrown darts and pick the stock and you would have made money.

Very few people made 100x money as they have seen that kind of market first time in Indian history.

(12/n)
(02) Second Bull market

He realized that good stocks don’t stop after 2x-3x, they may go to 100x or even more than that.

This time he made more money on smaller capital.

(03) Third Bull Market

made lot of money on lot of capital

(13/n)
#bearmarket Notes

(a) With experience, the bear market will not scare you the second time.

(b) Every bear market ends with V shape recovery.
First wave after end of bear market is always strongest. So don’t see your shares in panic.

(14/n)
(c) Small cap was 11 bagger from 2002-07. So 250% rise in small cap should not deter you to invest.

(15/n)
Importance of Cycles

Understanding supply side of #Industry is more important.

Demand of cyclical industry is more or less the same, it’s the supply side which fluctuates and determines the market dynamics.

(16/n)
Case of #steelindustry

During 2002-07 steel was booming which led to huge investment in the sector.

Over investment led to overcapacity which flooded the market with steel products. This results in decline in profitability of companies causing weaker players to shut off.

(17/
In 2007, there were 25 steel companies. Now weaker players have shut shop and currently 6-7 companies are left.

During boom cycle, company like Hindalco was available at 3x Mar cap/Sales which was not lucrative for investment.

(18/n)
Now in downcycle, the same company has attractive #valuation of 0.1 Marcap / Sales.

Learnings;
Good company may not be good investment.
Identify the cycle and then invest

(19/n)
Favorite matric for valuation

He likes Market cap / Sales as a valuation matric because;

-> Revenue is generally more dependable figure

-> It takes out the element of cyclicality in profits

(20/n)
On #marketcap as metric

Market cap as a standalone figure is the most fraudulent matric to look at.

Suzlon, DLF, Unitec all had market cap of 1 Lac crores, but now they have corrected more than 90 %.

(21/n)
On #FinancialServices Companies

Not interested to own financials as;

(i) Commodity business.
Lending rates, deposit rates, fee income are all market determined.

(ii) NPA is easy to manipulate.

DHFL, Indiabulls were AAA rated financials but see the market cap today.

(22/n)
Views on IPOs

Never invested in IPO

He has the policy to do what the promoter does (like buy backs or inside buying)
He tracks insider buying on daily basis.

In IPO, the promoter sells and he will never sell you cheap.

90% IPO’s that are wealth destroyers

(23/n)
Views on #Bitcoin

Not going to invest in Bitcoin

There is a sound logic behind bitcoin but it is taking the shape of bubble which may lead to collapse

Bit coin supply is finite and its popularity is increasing which will eventually led to mania and will probably end bad

24/
Reading habit

To increase odd of success, read at-least 24 books a year.

25/n
I think the interview offers good learning opportunity for budding investor.

If possible try to watch the whole video.

And if you like this thread please follow, retweet for further reach,

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