August 28, 2018

How do you analyse business and hedge against inflation in your normal life


How do you analyse businesses & hedge against inflation in your normal life? (Inflation = rise in purchasing power)

This is one of the most common question either i pose to my mentee’s or i get usually quizzed up on while i mentor. It is best understood, when i would answer it with an example which also is the best solution by itself.

Well, I watch at least 1 movie a month in PVR & the money i spend on ticket & Food / beverage is around 1200 rs for two. As & when i notice the show is running houseful  – i buy 1 stock of PVR (around 1200 rs) = if the show runs houseful i am sure this will add to their revenues  & eventually stock prices would also increase.

Indeed, you can hedge any kind of loyalty that you notice in your – daily day to day – life against many things..

  •  If you notice every other person is buying Sobha Or Brigade properties, you can buy stocks of ‘Sobha’ & ‘Brigade’.
  •  Well if you noticed Stress levels increasing amongst today’s working class – and they are taking to drinks twice a week.. If you see most people living on beer – you invest in brewery stocks like – ‘United Breweries’ , if you noticed more hard liquor being consumed – buy stocks like – ‘United Spirits’ or may be ‘Radio Khaitan’..
  • If you notice most people are aspiring to buy metal birds /bikes & want to start with Royal Enfield – you go buy ‘Eicher Motors’.
  • If most people around you trust Apollo Hospitals & show signs of their loyalty by relying on Apollo to treat illness – You can buy stocks of ‘Apollo Hospitals’.
  • If you think – Airtel is surviving competition against its rivals – methodically by its loyal customer base – you can buy shares of ‘Bharti Airtel’.
  • If you noticed – Ultratech Cement being mostly being used wherever you go anywhere across India – You can buy ‘Ultratech Cement’.
  • If you visit a village & notice that their is an upsurge in using technology in farming & slowly the there is change in mindset of people to adapt to something new – You can buy stocks like ‘Escorts’ or any Agri related stock.

Do not undermine yourself that you cannot analyse stocks & stay away or put off your investment decisions. You need not be an expert to analyse or wait to visit your financial advisor.  Start with this kind of elementary thinking about stock investments this way & slowly you can start identifying which company in a particular sector may be good to buy & then make progress with your learnings – by finding ways to analyse them. 

Mind you – this is a way only to begin to start actively thinking about investments for intermediates – to achieve better prospects you need to constantly raise your learning curve of stocks – that way you can create your winning portfolio of stocks & maximise your returns by diversifying risk.

–    Article by Suman Adithya Rao (SEBI Certified Research Analyst, Management Graduate in Entrepreneurship & Small Business Management)
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