A few times, we think about our friends or relatives and suddenly they come or they call us. Is it telepathy or coincidence?
But many times it happens that when you think of him and he doesn’t call; when you don’t think of him and he calls; when he doesn’t think of you and you call?. . .? There is an almost infinite number of occasions when you don’t think of him and he doesn’t call. But, since people spend about 90% of their time thinking about others, it is not unlikely that, eventually, two people will think of each other and one of them will pick up the phone.
Investment – Such kinds of events are rare but can happen. It can happen that when we punching order to buy some stock and management’s interview comes and announced for subdued performance in the coming quarter. So this can be a coincidence, not that God giving us a sign to do not buy a particular company as of now. So that we have to clearly focus on the investment process prepared by us and must follow it rigorously.
When we have to choose the B quadrant then we have to create a system and people will work for that system.
In the B quadrant, we need to know both system and people. It can be possible that our initial business might not work but we just have to focus on improving ourselves, our knowledge of the system, and people. Improvement in our knowledge only brings success in front of us. And it’s essential to get failure in initial business because if not then we will end up with big blunders later on. So, success is a poor teacher and failure teaches us a good lesson. Welcome failure, not run away from it. Learn from it and grow well.
If both the people and the system are leaky, the chances of failure are great. Sometimes it’s hard to know whether the problem is the person or the system that is failing.
There are few ways by which we can get support for starting a business
Find a mentor
A mentor who has operated his own business, not an advisor who has not operated any business. We need to learn from a mentor. Mr Sanjeev Bhikhchandani (Founder of Naukri) has supported Zomato.
We have to become a leader, not a manager. A manager sees subordinates as inferior but the leader appreciates smarts and brings them with him.
Buy a franchise
Franchises are a proven system. So here we are directly buying a system, not building our own. Now, we have to work as an E and follow what they told us to do. Because they have done it rightly, we should follow it right to get succeed. Investors or bank would lend money to a system rather than to a product.
Get involved in network marketing
Here also buy the existing system at a reasonable value and build own business. We get infrastructural benefits from a network marketing company. It’s a kind of buying a personal franchise.
For becoming a successful B, we require to have a few things to keep in mind
Don’t be fearful
People feel fear of what others say to them. Feel fear of getting a rejection.
Have to work with different kinds of people. For becoming successful, we need to learn to work with different kinds of people, lead them.
The system is only going to help us to drive successfully towards the B quadrant from the E or S quadrant. Building a system and working with people is lifelong learning for becoming successful in the B quadrant.
The seventh part of the Series “Current temptation, future frustration“. This series is based on the companies which are currently darling of the market and many trying to catch such opportunities but it has a probability to become a reason for future frustration. It can wipe out the majority of gains in wealth. I am trying to put some of the number-crunching facts by which we can identify ongoing issues in the companies and can save our wealth.
I am starting this article with one of the company which is engaged in the textile business has a 52 weeks low price of Rs.11.6 and LTP is Rs.38.8, the 52-week high price of Rs.47.8. This company has rewarded ~4.12x of return in a year.
Let’s start looking at the numbers.
We can see that the company has a high volatile OP Margin% and also having losses at a net level in few years.
When we look at the balance sheet then it seems that the company has an issue with higher debt and continues dilution of capital. We can see that though the company has diluted capital, the solvency ratio has worsened.
We can see that the company has huge related party transactions. Also, the major deposit given to the related parties.
Also, we can see that the company has negative CFO and FCF in the last three years which indicates that profits are not getting converted into cash profit.
Disclosure – Companies mentioned in the article are just for an example & educational purpose. It is not a buy/sell/ hold recommendation.
When we own something, the value of that particular things has psychologically increased for us. Loss aversion stops us from giving up what we own. We are slowly getting emotionally attached to particular products and automatically the value of that product increases for us.
We consider things to be more valuable the moment we own them. In other words, if we are selling something, we charge more for it than what we would be willing to spend for the same thing. We get attached to things we own and we keep on collecting different things. We can safely say that we are better at collecting things than at casting them off. Not only does this explain why we fill our homes with junk, but also why lovers of stamps, watches and pieces of art part with them so seldomly.
We should understand that everything which we own is given by the universe to us for temporary time so should not get attached to it. These things can get separated from us in the blink of eyes.
Business – We can see that owner of the business who is facing losses then also not ready to sell off the business. Also, they seek higher prices to divest business though business incurring losses. The founder of the business is emotionally attached to the business and want to focus on making it profitable.
Investment – When we own any stocks in our portfolio then we value it more and think that all others own fewer valuable stocks in their portfolio. We tend to sell our ownership for more than what it’s demanded. We feel portfolio companies have higher value and should trade higher than our acquired price. We also keep on purchasing stocks and then when we have owned it, we want to sell it for higher.
This attachment with our portfolio makes us blind to make a rational decision. That’s the reason our portfolio gets flooded with junks and we sell quality because the quality we can sell at a higher value than what we own.
Rather than keep focusing on the purchase price, we should focus on what is a current intrinsic value and fundamental of the company. When we start to avoid looking at the purchase price, the time we start reducing a few mistakes. First, we should write down the exit strategy during the entry time itself and follow it thoroughly. When our exit strategy has been triggered, we should not look at the trading price and dump a particular investment. A clear strategy helps us from the endowment effect.
