Wednesday, September 28, 2016

Enchanting Encounter With Rustic Beauty - Investing Poem

Enchanting Encounter With Rustic Beauty on an Early Morning Stroll

Along the beautiful tree lined avenues and residences I strode, ruminating spirituality and poetry, amidst peace and bird chirping background.

Upon a sharp turn, afar stood a woman in an Indian suit of black and pink – adjusting her hair standing in a side pose revealing all her attractive angles.

Brief, distant glances exchanged, Sharply she retired homewards, perhaps for a better view from the safety of the curtains?

I passed the house with intent sideways glance to check whether she stood in shade - but continued my stroll back to reflections and bird talk, finding her not to be there.

It was a mere passing scene on a early morning walk – one among many we see that make our lives bright, I thought. I strode on without any expectations – wearing a grateful smile - for the brief colorful sight.

But it was not to be.

On my routine next round, I again find her. This time standing in leisurely conversation with a timeworn woman I had seen trolling before.

A couple of long glances ensued. My heartbeat quickened. The old woman was serious in her advice; perhaps unaware of the real purpose of the discussion. The younger gave two, long, satisfying, glances.

Passing her close by, I aver she is not a conventional beauty, yet rustic and healthy, early in her middles. I am more advanced in time, though endowed with a firm thin frame and a fast gait. Fair in color she was and firm in flesh. Attractive she was in her own native way.

Further reflections focused neither on poetry nor spirituality but on exciting prospects that may lie ahead. I usually make only three, because of the paining knee. Now I extend it to four, expecting to find her in receiving extended guidance.

But I find her not there. Disappointed, I trudge along. Perhaps she has made her assessment. What it is, I can only know tomorrow during the early morning amble.

Alas it will not be. For I have to leave. I don’t live there. I am only on a visit and my next one is due only after a month.

But once, revealed, she cannot escape my pursuit.

For, I am a value investor and she is a stock.

She is strong. She is attractive. She is the share of NMDC Ltd., and I will surely find her and invest in her.

A rustic beauty I discovered, one day - a chance encounter during my early morning walk.


What is a Penny Stock?

A penny stock is a share in a company which sells at less than a dollar (in pennies or pence). The term is generally used in the sense of low priced stocks.
Penny Stocks on American Exchanges

Many people believe, perhaps by the face value of the term, that penny stocks are lowly. In most cases they are right.

In the context of India, if we have to translate the meaning, a stock should be selling at below one rupee to be called a penny stock. I was highly skeptical whether a share could be sold in paise. However after applying a filter I was shocked to find  quite large number of stocks indeed selling below a rupee! Here is a snapshot.

Indian Penny or Paisa Stocks
Leaving penny stocks aside, I would like to caution the audience that it is not right to judge the quality of stock just based on the price. There may be many factors behind a small price, like its face value ( a Rs.10 face value share may be trading at 200 and a Rs.1 face value share may be trading at Rs.20), listing at early stages of a company, etcetera.

In our Portfolio 2K15 there are a couple of small priced yet excellent stocks, though not penny stocks literally, as follows:

  • NHPC Ltd.: Rs.18.85
  • SJVN Ltd.: Rs.27.07


Penny stocks are stocks that sell below one dollar in the US and one rupee in India. By and large they are worthless. However it is not advisable to judge the stock on its face-value looking at the price. There may be a few excellent stocks that may be low priced, though not in pennies. 

What is Short Selling?

Short selling is a form of speculation indulged in by day-traders/ margin traders. Generally people buy something first, like stocks, currencies and commodities, hold them fore some time till the price goes up and sell the same at a profit when the price indeed goes up.
Short selling is selling something, without owning the item in the first place. The people who indulge in this practice are called short-sellers. It is based on the expectation that the price will fall and the same shares could be bought at a lower price. The motive behind short selling is to speculate on the price movements and make a profit therefrom. It is practiced during bear market conditions.
Short Selling Concept

How it works?
Mr.X expects the stock markets in general or the price of Infosys Ltd., in particular may fall and sells 50 numbers of Infosys Ltd., shares say at Rs.1000 a piece. At that time the market price of the scrip was Rs.1038.95. As he had expected the price of the share fell to Rs.975 during the day. After the price fell, Mr.X bought 5o numbers at Rs.975. Thus by the end of the day Mr.X’s positions got squared off and he made a profit of Rs.1,250 on the price difference of Rs.25 a share on 50 numbers of shares.
Risks involved:
The above example might have presented a rosy picture and one may be tempted to practice it, but it is a dangerous game. In India short-selling is sought to be discouraged by regulator, SEBI. In case the short-seller is unable to square off the position the same day on account of the price moving up rather than going down, then there are stiff penalties imposed besides paying the price difference.

Lets study the following Example:

Short Selling Example Infosys Ltd.
In conclusion, indulging in short-selling strategy as a part of day-tradingmargin trading is highly dangerous and must be avoided.