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manish_okhade
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Joined: 20/Oct/2008
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   Posted: 10/Nov/2008 at 6:03pm |
But what's the reason for deviation between earning slope and share prise slope in Bear and Bull phase? Is'nt it related to mkt sentiments? I mean gain is more in Bull phase and less in Bear phase for same growth rate in earnings for both the period.
So ideally does'nt it make sense to do investment only in Bull phase when gain is naturally outstanding? While in Bear phase its moderate as well as volatile.
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omshivaya
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Joined: 06/Sep/2006
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Posted: 10/Nov/2008 at 6:15pm |
If someone wants to make incredible gains, then bear market provides that perfect door to invest in companies that are growing earnings but whose stock prices are not moving up. Anyone who has made disproportionate gains would likely have invested in the bad phase where big bargains were available.
Of course, the herd actually does the opposite: investing only when bull market has resumed and panicking & selling when bear market shows its face. Lynch explains this behavior nicely in his cocktail theory(post number 6)
The deviation in earnings and stock price lines could be because of lots of things: not much publicity to the company, not much institution ownership and at other times it could be market sentiments as is the case in current market scenario.
Someone can view "bad market sentiment" as a blessing(if he likes seeing good companies at bargain prices) or as a curse(if he is out of cash or has a herd mentality)
All the above is in my humble opinion as I am also no expert...maybe Basant jee would be able to provide a much satisfying answer.
Edited by omshivaya - 10/Nov/2008 at 6:40pm
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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cooldude
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Joined: 07/Jul/2008
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Posted: 10/Nov/2008 at 7:09pm |
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Speaking of returns, Peter Lynch has given the highest 20 year return in mutual fund industry. He has achieved a return of 25.8% per year for 20 years (i.e till December 31, 1994). I guess we can call him the Bradman of the mutual fund industry.
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You can't see the future through the rearview mirror - Peter Lynch
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omshivaya
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Posted: 10/Nov/2008 at 7:28pm |
"Once you got into the game seriously, you'd be boggled by the examples of stocks that go down even though the earnings are up, because profssional analysts and their institutional clients expected the earnings to be higher, or stocks that go up even though earnings are down, because that same cheering section expected the earnings to be lower. These are short-term anomalies, but nonetheless frustrating to the shareholder who notices them.
If you can't predict fuure earnings, at least you can find out how a company pans to increase its earnings. Then you can check periodically to see if the plans are working out."
(P173)
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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omshivaya
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Posted: 11/Nov/2008 at 1:49pm |
Lynch once conducted a study to determine whether market timing was an effective strategy. According to the results of the study, if an investor had invested $1,000 a year on the absolute high day of the year for 30 years from 1965-1995, that investor would have earned a compounded return of 10.6% for the 30-year period.
If another investor also invests $1,000 a year every year for the same period on the lowest day of the year, this investor would earn an 11.7% compounded return over the 30-year period.
Therefore, after 30 years of the worst possible market timing, the first investor only trailed in his returns by 1.1% per year!
As a result, Lynch believes that trying to predict the short-term fluctuations of the market just isn't worth the effort. If the company is strong, it will earn more and the stock will appreciate in value. By keeping it simple, Lynch allowed his focus to go to the most important task – finding great companies.
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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omshivaya
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Posted: 11/Nov/2008 at 2:10pm |
"You get recessions, you have stock market declines. If you don't understand that's going to happen, then you're not ready, you won't do well in the markets."
"When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom."
"I've found that when the market's going down and you buy funds wisely, at some point in the future you will be happy. You won't get there by reading 'Now is the time to buy.'"
-Peter Lynch
Edited by omshivaya - 11/Nov/2008 at 2:11pm
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The most important quality for an investor is temperament,not intellect.A temperament that neither derives great pleasure from being with the crowd nor against it
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manish_okhade
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Posted: 11/Nov/2008 at 7:51pm |
Hey Cooldude,
25% return till 20 yrs is truely outstanding. Just wondering if Peter Lynch is managing some fund in India then still he would have given 25% in recent crash !!
Well not a single MF Mgr is able to do so in India. Does it mean in India we do not have any equity mgr even remotly close to Peter Lynch! It looks really odd to me.
Are you sure your input is correct? In 20 yrs mkt must have gone through many crashes.
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subu76
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Posted: 11/Nov/2008 at 8:26pm |
CAGR is what he meant.
So each rupeee would have become 86 bucks if you returned 25% for 20 years.
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