BIG INVESTOR'S MINDSET
19 June 2020, Friday
Read whole article. Your mindset will change definitely.
GOLDEN RULE FOR INVESTMENT:
"Buy undervalue stocks, Hold it for long time and when it goes at very higher price, Sell it."
In this article we will see why big investors are not investing in big companies like HDFC,TCS,Reliance. We will see mindset of some big investor with example. Warren Buffet, RK Damani, Rakesh Jhunjhunwala etc. are some great investors. They invest in small companies and over period of time these companies give much much higher returns. We will see some reasons behind investing in undervalued stocks.
Fundamentally top NIFTY stocks are very good. In fact they are very stable companies for investments. You will get good annual returns. Also these companies are paying good dividends. Still big investors are not investing in these companies.
Big investors are investing in small cap stocks or in penny stocks not in some giant companies.
They analyse so many stocks and find out which stocks are cheap and fundamentally strong. Then they invest in these cheap valuation companies.Now when these companies will perform better, price of these stocks will go higher and higher. Then big investors sell these stocks and earn Millions. There are many advantages to invest in these undervalued stocks.
- Small-cap(Undervalued) stocks tend to offer greater returns over the long-term, but they come with greater risk compared to large-cap companies.
- Historically, small-caps(Undervalued) have posted higher returns than large-caps, albeit with greater volatility.
- Because small-caps(Undervalued) are more nimble, small-cap companies can take more chances and take advantage of events and trends.
- Small-caps(Undervalued) are more nimble, small-cap companies can take more chances and take advantage of events and trends. This, in turn, leads to them historically having a better return on investment (ROI) than the big guys.
- Small-cap(Undervalued) stocks tend to grow at faster rates than their large-cap counterparts.
- They can also lose profit more quickly due to their size
- Small-cap(Undervalued) stocks are less proven, and so are rife with speculative investment due to lack of data and operation history.
Keynotes about small-cap stocks(Undervalued)
- Despite the additional risk of small-cap stocks, there are good arguments for investing in them. One advantage is that it is easier for small companies to generate proportionately large growth rates. Sales of $500,000 can be doubled a lot more easily than sales of $5 million. Compare this to large-cap growth, where $50 million in sales is a lot more difficult to translate into $500 million.
- Also, since a small, intimate managerial staff often runs smaller companies, they can more quickly adapt to changing market conditions in somewhat the same way it is easier for a small boat to change course than it is for a large ocean liner.
- The opportunities of small caps are best suited to investors who are willing to accept more risk in exchange for higher potential gains.
- Right Time:Finding the time to uncover quality small caps is hard work. Investors must be prepared to do some serious research, which can be a deterrent. Financial ratios and growth rates are widely published for large companies, but not for small ones. You must do much of the number-crunching yourself, which can be very tedious. That is the flip side to the lack of coverage that small caps get. There are fewer analyst reports for constructing a well-informed opinion of the company.
- Growth Potential:Most successful large cap companies started at one time as small businesses. Small caps give the individual investor a chance to get in on the ground floor. These younger firms are bringing new products and services to the market or creating entirely new markets. Everyone talks about finding the next Microsoft, Amazon, or Netflix because these companies were once small caps. Had you possessed the foresight to invest in them from the beginning, even a modest commitment would have ballooned into a small fortune.
Examples:
Warren Buffet:
Warren Buffett bought more than $1 billion of Coca-Cola (KO) shares in 1988, an amount equivalent to 6.2% of the company, making it the largest position in his portfolio at the time. It remains one of Berkshire Hathaway's biggest holdings today. Now just think 1988 market and today's market. At that time stock price of coca-cola company is very less. Today stock is trading at very high price. This is called investment
Rakesh Jhunjhunwala:
In 2002-03, Rakesh Jhunjhunwala bought ‘Titan Company Limited’ at an average price of Rs 3 and currently it is trading at a price of Rs 986. He is holding over 7.5 crore shares of titan company. He has an ‘overall’ holding of 8.45% in the company.Now just think 300 times return in one company. These is called investment.
Extra Knowledge:
1.Stocks to buy right now: Fund managers continuously increase holding
2.Stocks for investment: Some gave three digit return just in last one year
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