The Mood Swings of Mr Market: 3 exhibits from November 2016

Ben Graham, the father of Value Investing was the first to call out the Market’s mood swings, anthropomorphizing the creature we know as Mr. Market.

Mr. Market is emotional, euphoric, moody and often irrational 

This behavior of Mr. Market allows the investor to wait until Mr. Market is in a ‘pessimistic mood’ and offers a discount to fair value.

Strange how this wisdom echoes 40 years after Ben Graham, when all talk has shifted to indexing and market efficiency. Below I present 3 such money-making opportunities from November 2016 following the sudden ban on 500 and 1000 Rupee notes.

Irrationality at work

X – SOFTWARE PRODUCT SERVICES

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34% Returns from the November bottom

Banning currency notes does not impact B2B Enterprise Software Services Company, which is a primary vendor for *cough* Digital Banking Channels

Y – FEMALE CONDOM MAKER

2017-04-04_16-03-36.jpg

20% Returns from the November bottom

Female condom maker with revenues drawn mostly from foreign government orders. Hey, if you thought coupling would stop with the currency ban – you could have latched on to this other “de-coupling” idea.

Z – MID-STREAM NATURAL GAS

2017-04-04_16-08-35.jpg

53% Returns from the November bottom

Natural gas de-hydration and compression would not slow with a ban on big notes. Maybe, if you were an ALDS franchise or selling directly to consumers – but not a mid-stream player like Z, whose revenues are drawn from multi-year fixed-price contracts with Public Sector companies.

Conclusion

You don’t need to be a stock picking genius. A little bit of grit and common sense can make you decent returns. Just watch for Mr Market’s mood swings, and be greedy when others are fearful.

DISCLAIMER:
I am not registered with SEBI under SEBI (Research Analysts) Regulations, 2014. As per the clarifications provided by SEBI: “Any person who makes recommendation or offers an opinion concerning securities or public offers only through public media is not required to obtain registration as research analyst under RA Regulations”. No BUY/SELL/HOLD advice is offered on this blog. I am a hobbyist not a professional. Views expressed are my own and not of my employer. Stock Markets are very risky and can cause a permanent loss of capital. You should seek professional advice.

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