Two good links to read this weekend
And is it time to invest in stock market?
Hey,
When the market corrected by more than 10% by the first week of April 2020, most of us received emails, calls, and suggestions to buy.
The reason was simply that good companies are available at a reasonable price and don’t try to time the market.
But, isn’t the vital rule of investment is to also look at the future of the company?
From what I see, this correction was not a healthy market-driven correction.
This fall is due to a growing pandemic and an unprecedented measure of the lockdown of the entire country. And from where we stand, unless the epidemic is at least at some level of control, some version of lockdown will continue.
When such measures continue, it changes the dynamics of the economy and business.
It takes time for such things to be clear. Clear enough to evaluate if this business will be able to adapt to the changing economy in the coming months and years.
You see, the stock market is not like a spring, that it goes down and then comes up just like that.
Few companies when they go down, they stay there, and new ones come up. It happens with every correction that was there in the stock market, for every correction that was more than 20%.
For example, even if lockdown eases up, traveling will take a substantial hit, at least for the remainder of this year.
Similarly, lockdown will not be eased in one go, but in staggered phases and with conditions attached. All these conditions will decrease earning potential.
So, the best idea will be to wait for earning reports of the companies to be out. It will give a fair idea about what the management is thinking about the future.
About the new leader that can come up:
With forced work from home conditions, many companies are going to change the way they operate. Of course, there are cost benefits attached too.
For example, US-listed Zoom has seen it’s user base grow multiple times in the last couple of weeks. This is not going down anytime soon.
Please research companies that are benefiting from current conditions. Like the pharma sector. You will definitely see some gems there.
Before I sign off, here are the two good articles you can read in 10-15 min:
MarketWatch: Stormy market and investing
Do share your views about the newsletter.
With care
Rohit