Learning from 2020

lot of learning made in 2020 here are some  key of them which I had noted for improvement.

when it comes to taking decision on investing in bear market I did failed in 2020.

I failed to add / increase my exposure to quality company like allcargo / polyplex during 2020 lockdown disruption it was all  in my mind but didn't have the courage to make the decision.

both of this companies performed better then expected during the Q2 / Q3  of 2020 probability is high they will in upcoming years.

Failed to take exposure in pharma companies during bargain stock price I was convinced  pharma will perform in 2020 as this is necessity to keep the supply chain available of medicines globally.

reason no courage to make the decision.

Lesson learned : I need to enhance my thinking process which is needed  for investing to get clarity of thoughts for decision making.

bear market and disruption are the best opportunity  to invest in quality management who can stand still and increase exposure when company are performing well during uncertainty.

lost patience in one of the quality company stock polyplex and made a early exist.

Lesson learned : question why you want to sell ? if the answer is uncertainty then hold that moment erase all the noise.

I have enhanced my approach to get clarity in  decision making process here is my key question and checklist I consider to take exposure for companies

1) why do you want to invest ? is it growth / stories / or your own thought process that brought you to this companies ?

if its story then better to trade on story rather then parking money for long.

if its your thought process then take a next steps for checklist for long exposure

2) is cashflow / balance sheet supporting ? 

how much % of operational cash is getting converted ? is it on higher side 15 to 20% + ?

what % of  operational margin it makes ? 25 to 30% + ?

3) is the company investing in its growth and how its investing via debt / equity or cash usage ? 

if its via debt / equity question why is not using cash available ? no cash available then how is the companies sustaining in the industries ? check other companies in the same industries is it same case ?

past investment scenario how it was done and its performance ?

3) is the company paying dividend ? what is the yield ?

no dividend question is why ? if no dividend and I assume it must be using the money for investing in companies growth ? if not then where is the money going ? is the management eating up the cash via higher payments to them ? check employee cost ?

4) is it a cyclically scenario of company  ? commodity based product ?

yes - then long exposure cannot be made - set a target when to sell once exposure is taken as commodity based product are cyclically like crude / steel / cement / chemicals .

no - is it a monopoly business or in the top 3 franchise of its industries ? any dependences of its product in market ? what can cause failure for monopoly business ? what is the probability  of such failures ?

5) study on management team ? can it be trusted  ?

- increase research about management team / search interviews / read con call details / annual reports.

check how well is the management answers the queries raised are they making too much forcast for growth ? do they acknowledge the gaps or failures made or just cover up the story ?

if it passes this condition I take exposure in the companies when the stock price is at bargain range.