Do single company sector analysis at a time. Spend time in understanding the business.
Buy only when you are too much comfortable with the price of a great business.
“Heads I win a lot, Tails I don’t loose much”. Need some more technical insight to price the business properly. Need to understand why exactly the risk of continuous downward trend is less for a company when things are not right.
Simply put I can’t apply the idea with my current understanding. I can only apply smaller parts from the whole idea presented in the book.
I should not study multiple companies in one go jumping from one to another. There is no shortage of opportunity so start focused study of single company at a time with sector analysis. It may not be beneficial right now but will be easier for me in future understanding.
Do not rush to buy when pin pointed on a stock. Wait for an entry point which will minimize your losses in bad scenario. Never buy high.
Q. What if it continues to grow?
Keeping an exit strategy before entering a stock. Like 50% up exit because that is the value of the business and it is costly now.
When you have achieved good profit in short amount of time and looks like most of the juice is gone don’t wait and be greedy sell and exit. Whenever you realized that price you have thought of is achieved.
Q. I do not have this much time to price the business with time and then exit. This also mean I have to keep looking for newer opportunities continuously which is okay but if I sell fast I will need to generate ideas fast and single idea generation is too much effort.
Never go for a company which doesn’t fit your basic principles.
Wait like hawk you will get opportunities
For each business make an evaluation chart and find the price for each
- Management (honest, able)
- Long term prospect
- Business you understand
- Minimal downside
- Willing to invest a large part of your net worth (comfortable).
- Large discount
Kelly Formula for calculating the exact percentage of your net worth you should be betting.
If a stock is not making proper profit in three years exit. If intrinsic value is now equal to market value then exit. Before making exit you should give it at least two to three years.