“How to avoid common mistakes and uncommon losses” by Mr. Niteen S Dharmawat

Speaker: Niteen S Dharmawat, Co-Founder, Aurum Capital

Contributed By : Ria Agarwal

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I have always felt that the best quality of a good speaker is when they can grab the attention of the audience within 30 seconds of coming on stage. This is exactly what distinguished Niteen S Dharmawat. The speaker started his session with trying to understand his audience by asking a simple question, ‘How many of you are active investors?’ This made the speaker connect with everyone in the audience immediately, and was a great way to start the session. While discussing stocks it is unavoidable to name a few companies and rate their performance so the speaker gave a very important disclaimer right at the beginning of his presentation, that nothing said today is a recommendation to/not to invest.

When investing in the markets, it is a difficult task to know which company to put your hard earned money in and which one to avoid. The agenda of our discussion today is going to be in 5 parts, discussing on how to see various steps of investing.

  1. We get tips from our contacts or hear about a stock opportunity from someone or other forms of information, how should we apply the same.
  2. How to do a quick screening and look at the basic numbers to avoid committing major mistakes.
  3. Then we would study a few parameters for an in depth study, from the information we can obtain.
  4. After that we will look into a few case studies that show examples of how mistakes could have been avoided for some scandals reported.
  5. How can delayed gratification work and why is it the most important?

Some of the most important factors to work on before investing are as below:

  1. Timing the Market

One of the most important features is when to invest and what is more important- time to market or time in the market. Most investors are highly irrational during the bull market and have this misconception that bear markets are not good for investors whereas most of the high-stake investors have earned the most if invested during the bear phase of the market, with due diligence.

A lot of people focus on the returns but forget the time aspect especially when it comes to wealth creation.

2. Classification of your portfolio

As every investor is different, every investor should have their own investment strategy. The portfolio building strategy should keep in mind the type of stocks, the time period of investing(short, medium and long term) and also the number of stocks(shouldn’t be too many so that it is easier to keep track)
Restructuring and reconstitution of portfolio should be done as required.

3. Analysing the Financial Statements

Everyone has a different approach and different variables while understanding the annual reports, below are some of the factors.

  • a) CFO- Gives a better idea of the cash transactions of the company
  • b) Interest paid v/s net profit
  • c) Receivables trend
  • d) Promoters un-pledged holding percentage
  • e) Equity dilution
  • f) CFI and CFF
  • g) Interest to net debt

Depending on the industry there are more and different factors to look into for analysis. Analysing and reading the notes to financial statements can also be a great indicator for understanding the companies working.

4. Studying the CEO and MDA letters

Reading the Management’s Discussion and Analysis present in the annual reports along with any external communications issued by the company gives everyone a lot of insights into the internal workings of the company. The conference calls, presentations, annual reports and news from valid sources are how you can look deeper into the company rather than just their numbers.

5. Corporate Governance practices

Having good corporate governance practices is just as important as returns and sometimes more important for some investors. There are a lot of factors that can be considered for the same including the board of directors of the company (more specifically the independence of the same), the remuneration for independent directors and the overall practices followed by the company.

If you want to know about more factors there is an article solely on the practices of Corporate Governance: –https://cfasocietyindia.com/2020/01/05/full-day-highlights-of-eventcorporate-governance-in-investing-theory-vs-practice-pune-2019/

Finally at the end of the seminar a video was shown on the concept of delayed gratification known as the ‘Marshmallow experiment’. Delayed gratification is a very important concept while investing because as mentioned earlier, since time is more important of a factor than returns while talking about the money you make.

Throughout the seminar the speaker explained all these factors with various case studies and audience interaction that grabbed everyone’s attention. Overall it was a great learning opportunity and I look forward to more such sessions.

Link to session presentation – https://www.slideshare.net/ndharmawat/how-to-screen-stocks-so-as-to-avoid-common-mistakes-and-uncommon-losses

Watch video at- https://www.youtube.com/watch?v=NUZ2MTJjvnU

 



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