Market corrections are buying opportunities

Market corrections are buying opportunities in quality stocks. In the preface to 'The Intelligent Investor' by Benjamin Graham, Warren Buffett says, "To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information.
What's needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework". If you can strengthen your resolve and stay the course regardless of popular opinion, analyst views and technical targets handed out daily, you will be able to get good returns on your investments.
Markets have seen many ups and downs over the years. These are caused by various macroeconomic factors like inflation, interest rates, recessions and business cycles. India's domestic demand for equities is small compared to the money muscle of the foreign institutional investors (FII). So they are in a position to take the markets to very high levels when buying into Indian stocks or bring down the markets if they sell some of their holdings. So FIIs can be added to the list of factors causing the macroeconomic dance in the Indian stock markets.
In such a volatile, shaky and fragile environment, you have to keep your emotions in check and focus on your investment decision-making. This helps in getting a more objective view of current price fluctuations. If led by emotions you had sold off your entire equity portfolio in May-June 2006 when the Sensex was at 8,799, you would have missed out on the ensuing rally unto 14,035 - a rise of about 60 percent.
The three major emotions that colour investment decisions are fear, greed and hope. Fear makes investors sell very low. When the prices of stocks are nose-diving investors are frightened and sell without checking their investment plans. In such times, it is better to check whether the original reasons for investing in the stock have changed due to the fall in the markets.
The markets can based on a short-term focus and oversell a stock where its price falls well below its fair value. Selling when the price is lower than fair value is meaningless as in the long run the price of the stock recovers.
Hope is the emotion that makes investors purchase a stock based on its price appreciation in the past. Buying on the hope that history will repeat itself regardless of a stock's fundamentals is not a smart move. It is important to look less at the past returns and more into the company's fundamentals to evaluate the investment decisions. Basing your investment decisions purely on hope may leave you with a stock that is already fully valued, with higher chances of losses than gains.
Under the influence of greed investors may hold onto to a stock for too long, hoping for a few extra rupees. When the markets are going up, the euphoria is magnetic and they expect it to continue for long. By doing this investors could end up turning large gains into losses.
Timing your buying price and selling price of any stock is extremely tricky. In early May 2006, investors whose investment goals were already achieved may have lost out if they had held on expecting further increase in the price of their stocks.So, one of the key factors to successful investing is control over emotions.

Small caps worthy of a second look

Looking for small cap value
In our search for hidden value in lesser-known stocks, we followed a rigorous, purely quantitative analysis:
Step 1. Since the relatively undiscovered stocks are most likely to be those of smaller companies, we looked at all the listed stocks with a market cap below Rs 500 crore (Rs 5 billion), but above Rs 50 crore (Rs 500 million) so as to filter out the least liquid stocks. This process yielded a total of 836 companies.
Step 2. Out of these, we selected those which looked to be the cheapest, namely those with a PE ratio of less than 15. We were now left with 405 companies.
Step 3. We now looked for consistent growth -- those that have seen profit after tax (PAT) grow by at least 15 per cent year-on-year for the last three years. This left us with the 12 companies profiled below.
This exercise is meant only as a starting point for deciding whether to invest in these companies. Small-cap stocks are typically more volatile than large caps, and present both higher risks and higher rewards.
If any of these stocks takes your fancy, we suggest you put only a small amount into it, and stay invested until wider buying interest develops.
1. Aegis Logistics: Incorporated in 1956, the company is in the specialised business of storage and handling of bulk items, especially oils, chemicals and petroleum. It has
consistently given its shareholders dividends, and is currently quoting at about Rs 140, well below its 2005 peak of over Rs 300.
2. Crew B.O.S. Products: A leading leather exporter, the company is also listed on Luxembourg stock exchange and has consistently paid dividends. It recently announced plans to issue preference shares to promoters, which will have the effect of diluting earnings per share (EPS).
3. Dewan Housing Finance Corp: In business since 1984, the share currently quotes at about 30 per cent below its highs in June 2006. It has recently expanded operations into the Gulf area to facilitate NRI investment in Indian housing.
4. Eastern Silk Industries: This Kolkata-based company was started in 1946. Its broad production range includes silk yarn, fabrics, embroidery and accessories.
5. GIC Housing Finance: Promoted in 1993 by General Insurance Corporation, the company is largely held by public sector insurance companies. Business has benefited from the current real estate boom, and as a bonus, the regular dividend of 15 per cent offers a high yield.
6. Jetking Infotrain: Incorporated in 1984, Jetking offers computer education through 60 centres -- company-owned and franchised. It specialises in hardware and networking education and readies students for direct entry into the job market.
7. RTS Power Corp: In operation since 1947, this manufacturer of electrical transformers and related products seems to have benefited from the recent infrastructure boom. It has also made a tentative foray into wind energy, with a 1.25-MW wind power plant at Dhule, Maharashtra.
8. Raj Rayon: In business since 1993, Raj Rayon recently set up a polyester yarn plant at Silvassa. It has paid 10 per cent dividend for the last two years, and currently trades at Rs 43, more than double its June-low of less than Rs 20, but a long way from the earlier high of Rs 81.
9. Shri Dinesh Mills: In operation for 70 years, the composite textile set up has recently entered into a joint venture with US-based company McGean Rohco Inc to produce speciality chemicals.
10. Surya Pharmaceutical: With four units in the tax-exempt areas of Himachal Pradesh, Surya focuses on penicillin and its derivatives. Other products include cephalosporins and anti-histamines. It exports over 50 per cent of its production.
11. Tricom India: Started in 1992, Tricom is an early entrant into the BPO business, specialising in electronic management of business documents for overseas clients. It recently announced a 1:1 bonus.
12. Vivimed Labs: Set up in 1988, Vivimed has a large product offering of healthcare products, including over the counter products. It also partners customers in synthesizing and developing new products.

Stocks good for investing at current levels - MC

Stocks trading at a discount to their book value
Stocks like MTNL, HPCL, OBC, SCI, Bank of Baroda, Arvind Mills and recently listed companies like GVK Power Infrastructure, and Visa Steel are all available at a steep discount to their book value.
Click here to read full article.

Stocks that hit 52-wk lows since May 11
982 companies, out of the 4475 companies that are actively traded on the BSE, touched their 52-week lows since May 11. Interestingly, a whopping 899 out of these touched their nadir on one single day, June 8, as the Indian benchmark index, the BSE Sensex crashed by 461 to close at 9296 points.
Click here to read full article.

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Price/Earning ratio

Every product or service has a value. A host of factors determine this value, which includes amongst others input costs, fixed costs, taxation, cost of capital, demand-supply scenario, etc.
In many cases these factors are readily determinable and accordingly it becomes easier to determine the fair value of the said product/service.
But in some cases like 'art', determining the fair value is difficult as the factors affecting its price are largely qualitative. 'Equity shares' is another such product where fair valuation is difficult.
Equity shares is seeing increasing acceptance amongst the investor class due to its ability to deliver superior post-tax post-inflation returns, good economic growth, improved regulatory framework, and efficient & transparent mutual funds.
In the last couple of years the Sensex has seen exponential growth.
Hence, it is important to understand how various factors affect the price of a stock, which would then enable us to take a view as to whether at current prices the particular stock is overvalued or undervalued.
Valuation of a stock is difficult as its price may fluctuate differently to short-term factors and long-term factors. Secondly, these factors and their effect on the share prices are not easily computable, making the task of valuation more difficult.
The short-term outlook
Liquidity, demand-supply scenario, political uncertainties, budget, corporate announcements etc are some of the factors, which affect the price of a stock in the short-term.
Suppose there is good news flow for the steel industry. Then practically all the steel stock prices will move up even though some of these companies may not be performing too well.
Therefore, buying and selling in the short-term is more of a trading call than an investment call. It is suited more for a person who can invest his time daily to the stock market.
The long-term outlook
The real benefit of investing in equity markets accrues through long-term investing.
Hence it is more pertinent to understand the stock valuation from a long-term perspective.
In the long run, the price of a stock is the reflection of the operational performance of the company. The expected growth and future profits will determine the price. And because we have to take a view on the future prospects of the company, the industry and the economy in general, assessment of the 'right price' becomes difficult, subjective and prone to large volatility depending on how the future unfolds.
The Price/Earning ratio or the PE ratio is the term commonly used to assess the fairness of the stock price.
PE ratio is defined as the ratio of market price to earning per share (EPS).PE ratio = Market price of the share Earning per share (EPS) EPS in turn = Profit After Tax (PAT) Number of shares in the share capital The common sense would dictate that lower P/E ratio means that the price is undervalued and higher P/E ratio means that the price is overvalued. Unfortunately, life is not so simple. If it were so, you would not be reading this article. You would be sitting on the stock market and minting money by buying low P/E ratio stocks and selling high P/E ratio stocks.
In absolute terms there is no 'right' PE. One cannot say that PE of a stock of say 10 or 15 is good or bad.
One can only make sense of a P/E number of a particular stock by
comparing it with P/E of other companies in the same line of business
comparing it with the benchmark indices say Sensex P/E or Mid-cap P/E
assessing the growth potential of the industry
assessing the growth potential of the particular company
Let's look at a couple of cases - Banking & IT - to get a better appreciation of the P/E number. Banking as an industry enjoys an average P/E of around 8-10, vis-�-vis IT, which enjoys PE exceeding 25-30. The reason is simple - growth.
In a normal scenario the profits of a bank are the spread it earns between the interest rates on deposits and lending. And this usually varies between 2-4 per cent.
If the interest rates on deposit go up, the lending rates will also go up and vice versa. Therefore, the profit potential of a bank is limited. And hence the P/E ratio for banks is usually below 10. The only option for a bank to grow is by increasing the asset size.
Banks like HDFC and ICICI are rapidly increasing their asset base every year vis-�-vis the nationalised banks. Hence, they enjoy much higher P/Es of 20-25.
On the contrary most IT companies are growing at 30-40 per cent p.a. Therefore, in anticipation or likelihood of such high growth rates, the P/E ratios of 25-30 are not unreasonable even for average IT companies. The larger and better companies may even enjoy P/E in excess of 30-35.
Therefore, one should keep in mind that:
There no concept of an absolute right PE
It is quite normal to invest in a high growth industry like IT with P/E of say 20, but not so for a low growth industry like bank
A low P/E vis-�-vis the industry average (e.g. Bank A is quoting at 3 PE as compared to the average of 8 PE for the banks) does not necessarily mean it is cheap. The PE may be low because the bank is having some problems and hence may not be expected to do well in the future.The P/E number requires careful analysis. Only then can one assess the over or under-valuation of a stock and decide on the investment worthiness of the stock.

Stocks to watch out for

1. Man Industries
Man Industries is a major Saw (submerged arc welded) pipe manufacturer with two plants at Anjar (Gujarat) and Pithampur (Madhya Pradesh). Saw pipes are used for cross-country transport of critical inputs, mainly oil and gas.
Over the next 3-4 years, global demand for Longitudinal Saw/Helical Saw pipelines is estimated at 2 lakh km, including 20,000 km in India.
Prospects for the company look good. It has an outstanding order book of Rs 1,250 crore of which Rs 850 crore are for exports and the rest for the domestic market. It has managed a Rs 400 crore export order to supply LSaw pipes and participated in bids amounting to about Rs 2,000 crore. It expects a success rate of around 20 per cent.
Prices of HR plates have not gone up much (about $750 per tonne X-65 grade) and the company has ensured availability for its entire requirements of plates to cover its existing orders.
Its new plant at Anjar commenced full-fledged commercial production in October 2005, benefits of which will accrue going forward. The stock is worth buying with a price target of Rs 250.

2. Era Constructions
Era Constructions India (ECIL) is a fast-growing mid-sized construction company and a beneficiary of large scale construction activity across sectors like roads, railways, ports, airports, power projects and commercial complexes.
ECIL is increasingly focussing on high margin industrial projects, where timely completion and delivery are critical.
ECIL has lined up several other growth drivers over the near and medium term like pre-engineered building materials, export of structural and allied designs and real estate development.
Group company, Era Metal Building Systems makes pre-engineered building material, which are used in non-residential projects such as industrial plants, railway stations and airports.
They form the core of the superstructure and are fabricated separately even as foundation work is going on at the site.
Thus, a project gets completed in half the time, six months instead of a year.
ECIL has also set up a 100 per cent EOU for structural and allied designs. Here it plans to undertake designing assignments for exports.
To begin with, ECIL plans to tap the Middle East and the UK markets for its products. Contribution to revenues from this division in FY07 is likely to be about Rs 40 crore.
ECIL has a 12 per cent stake in Era Infrastructure. This company develops real estate and has about 400 acres of land. The promoters have a target of increasing the land bank to about 1,000 acres. ECIL also has a small stake in Era Financial Services, which plans to operate multiplexes.
In February 2006, ECIL concluded a GDR issue which has strengthened its net worth by Rs 190 crore to bid for big-ticket projects. The stock is recommended with a price target of Rs 400.

3. Mahindra Ugine Steel
There are two main investment arguments for Musco. First, a transformation from a pure alloy steel company to a sheet metal stampings outfit and second, integration into Mahindra & Mahindra's (M&M) ancillarisation initiative MSat (Mahindra Systems & Automotive Technologies).
In FY06, Musco completed its merger with Pranay Sheetmetals (a stamping unit at Nashik), Valueline Hotels & Resorts and Console Estate & Investment.
Operating margins are up from 16 per cent in FY05 to 19 per cent in FY06 and net profit adjusted for extraordinary items is up 26.5 per cent. Following the merger, Musco issued about 15.5 lakh shares to shareholders of Pranay.
As a result, equity is up from Rs 30.93 crore to Rs 32.48 crore. Post preference dividend, EPS stands at Rs 18. For FY07, we expect an EPS of Rs 22. At the current price of Rs 104, the stock is trading at a P/E of 4.7x FY07E. Even the dividend yield is a healthy five per cent. We recommend the stock with a price target of Rs 200.

4. Venus Remedies
This R&D company makes drugs to treat tumours. It has filed five international patents and six domestic patents. Its products, based on combination therapy in the cephalosporin space, have been successful. We are confident that the company will deliver 100 per cent CAGR in topline and bottomline till 2010.
The 100 per cent subsidiary in Germany is close to getting a German GMP certification that would be valid in EU, Japan and Latin American countries.
Exports generated about 17 per cent of the revenues in FY06 and it currently exports to about 13 countries, primarily to the CIS. We believe the company can become an outsourced manufacturing company for foreign multinationals by next year.
In our view, the current P/E of less than 6x FY07E earnings, does not adequately discount the future cash flow.
Venus posted good results for FY06. Sales increased by 170 per cent to Rs 92.1 crore, while net profit shot up by 311 per cent to Rs 8.4 crore. It has also tied up with three more domestic pharma companies, namely Wockhardt, Indoco Remedies and Alembic.
The management has given a guidance of a 50 per cent topline growth in FY07. We recommend a "buy" with a target price of Rs 693, almost 3x its current market price.

5. Asian Electronics
This energy saving company (Esco) manufactures lighting products that save energy. Asian Electronics (AEL) sells T5 retrofit and street lights.
Currently with more than a Rs 350 crore order book, the company will supply CFL lights to households in Maharashtra through MSEB for which payment will be collected on a monthly rental basis. We expect doubling of net profit in FY07 to over Rs 50 crore. The stock is available at less than 7x FY07E earnings.
The government has mandated establishments with power requirements above 500 KW to cut their energy bills by 30 per cent over the next three years and directed companies to install energy efficient equipment.
The management is focussing on both organic and inorganic growth. It has taken over Raymolds Lighting which enjoys a significant market share in the retail malls segment in India. We recommend a "buy" with a target price of Rs 700 for the stock.

6. Lloyd Electric
The company manufactures heat exchanging coil for air-conditioners and has now gone into forward integration to manufacture air-conditioners for Samsung and LG from its Himachal and Uttaranchal plants. It has tied up with an Australian company to manufacture ACs for the Delhi Metro.
In addition, the company will manufacture heat exchanging coils for refrigerators for which technological knowhow will come from a Korean company in the frost-free segment. We believe that the stock has over 150 per cent appreciation potential.
The company has increased its capacity to assemble ACs to 2 lakh units per year in FY06. The company is utilising its Kala-Amb plant primarily for contract manufacturing and has customers like Samsung, Electrolux and Carrier.
It is setting up another manufacturing plant to assemble ACs, with 2 lakh units per year capacity in Dehradun. After commissioning of this plant, we expect revenues and profits to grow significantly, as this plant too will have excise and tax benefits. We recommend a "buy" with a target price of Rs 293.

7. HEG
It is the world's fifth largest company in the graphite sector. The major demand driver for its graphite business is the increase in steel production through the electric furnace route, which accounts for 35 per cent of the total steel produced.
Demand from both, blast and electric furnace, is growing at 4-5 per cent globally per annum. The incremental demand is 40,000-50,000 tonnes and HEG, as well as its Indian peer, Graphite India, have expanded capacities to meet the same.
Moreover, the export prices this year are about 20-22 per cent more than the previous year. The growth in FY07 is expected to be high.
We expect the topline to touch Rs 850 crore in FY07 and the PAT is expected to reach Rs 107 crore. The first two quarters of the year should be good and we see a P/E of 5x on FY07E.
The company has ventured into the steel billets business and is integrating it with its sponge iron business. This has been a drag on the company's numbers. We recommend a "buy" with a target price of Rs 228.

8. Subhash Projects
This mid-sized construction company has a Rs 2,300 crore order book, which is to be executed over the next 24-30 months.
The EBITDA for the industry is growing at 8-10 per cent, while it is a bit lower for this company at about 7.5 per cent. We see a P/E of 9x on FY07E earnings, while it is about 15-17x for its peers FY07E.
Moreover, the government has accelerated infrastructure spending in various sectors like power, airports, transmission & distribution, irrigation and water-related projects.
The BOT model is favoured for highway projects to encourage private sector participation. Total spending by the central government has improved to over $150 billion in the 10th plan from $90 billion in the 9th.
The company has key capabilities in executing water-related projects and electrical T&D projects for renovation & modernisation (R&M) of current power infrastructure and rural electrification (RE) projects.
The current order book is distributed between water-related projects including irrigation (63 per cent) and T&D projects (37 per cent). We recommend a "buy" with a target price of Rs 294.

9. BOC India
The Q4 numbers for this company, engaged in the manufacture of gas cylinders, were good. Moreover, it has recently signed a two-year gas supply contract with JSW Steel for supply of over 3,000 tonnes per day of gaseous oxygen, nitrogen and argon to meet the latter's demand for gases arising from the expansion of their steel making capacity at Bellary.
We expect a P/E of 10x on FY07E earnings, which is cheap considering its MNC credentials. With the takeover process of parent company--BOC Plc--by Linde AG in progress, an open offer is expected.
The focus on India in this business is increasing with the expansions happening in the steel sector. Investors with a long-term horizon of 2-3 years should hold on to the stock as the prospects of BOC India are good.
Short-term investors can exit if the open offer is priced between Rs 230-250. We recommend a "buy" on this stock as it holds potential.

Stocks you can pick up this week - ET

Cummins India
Research: JM Morgan Stanley
Recommendation: Buy
CMP: Rs 164.25(Face Value Rs 2)
12-Month Price Target: Rs 228

Cipla Research: CLSA
Recommendation : Buy
CMP: Rs 210.35 (Face Value Rs 2)
12-Month Price Target: Rs 280

AIA Engineering Research: Enam Securities
Recommendation: Outperformer
CMP: Rs 528.30 (Face Value Rs 10)
12-Month Price Target: Rs 700

Tata Teleservices (M) Research: IL&FS Investsmart
Recommendation: Buy
CMP: Rs 18.00 (Face Value Rs 10)
12-Month Price Target: Rs 55

12 rules that can save you further losses - MC

With the markets sliding leaps and bounds, you need to keep your calm and find ways to cushion the free fall. In a book review of Zurich Axioms, our expert Kanu Doshi, talks about 12 strategies that can help you reduce your loss. Reviewer's Note: The author (Max) son of a very wealthy Swiss citizen by name, Franz Heinrich, (whom Americans preferred to call Frank Henry), jotted down all the principles of speculation strategies, particularly in stocks, adopted by his father and his father's several other Swiss friends to make large fortunes on the Wall Street in USA in roaring Eighties. Principles perfected by these Swiss gentlemen have therefore been called "Zurich Axioms" by Max.
Enumerated below are twelve major principles and sixteen minor ones with brief comments by Kanu Doshi on each of them:
First Major Axiom: On Risk “Worry is not a sickness but sign of health. If you are not worried, you are not risking enough.”Adventure is what makes life worth living. Every occupation has its aches and pains. The rich have to worry about their wealth. But, if there is a choice between remaining poor and worry-free, the selection is obvious. It is better to be wealthy and worried than to be worry-free and poor.
Minor Axiom I: “Always play for Meaningful Stakes.”If you invest Rs. 1000 and your investment doubles, you have only Rs. 2000 and are still poor! So if you want to be rich, you must increase your stakes.
Minor Axiom II: “Resist the allure of diversification”. Firstly, diversification negates the earlier principle of playing for meaningful stakes. Secondly, it may keep you where you began so that your gains on few will cancel out the losses on the other few. Thirdly, it entails keeping track of many more items leading to confusion and occasional panic. Second Major Axiom: On Greed “Always take your profit too soon.”Lay investors having made the investment tend to stay too long on it out of greed for higher profits. But, one must conquer this weakness and book profits soon. If one is less greedy for more profits one will take in more. Don't stretch your luck. In effect, it suggests, SELL sooner than later.
Minor Axiom III: "Decide in advance what gain you want from the venture, and when you get it, get out. Decide where the finish line is before you start the race".
This is self explanatory and hence needs no comment.
Third Major Axiom: On Hope “When the ship starts to sink, don't pray, jump”This axiom is about what to do when things go wrong. Learn how to accept a loss. One should accept small losses to protect oneself from big ones. When the market starts falling, sell, take your money and run!
Minor Axiom IV: "Accept small losses cheerfully as a fact of life." Expect to experience several smaller losses while awaiting a large gain.
Fourth Major Axiom: On Forecasts"Human behavior cannot be predicted. Distrust anyone who claims to know the future, however dimly." The story of a monkey throwing darts on the stock exchange page of a newspaper, to select the companies to buy, and coming out a winner is too well known to be recited. Recent news from London, further proves the truth, when an untrained chemist's stock selections, in a widely publicised contest open to all and sundry, registered higher appreciation over several full time highly qualified fund managers' well researched selections. Human events cannot be predicted by any method by anyone and, hence, don't trust anybody's predictions.
Fifth Major Axiom: On Patterns "Chaos is not dangerous until it begins to look orderly." The truth is that the world of money is a world of patternless disorder and utter chaos. This axiom is a commentary on Technical Analysis - a branch of investment strategies based on charts and patterns. The fact is, no formula that ignores own intuition's dominant role can ever be trusted.
Minor Axiom V: "Beware the Historian's Trap". This is based on the age old but entirely unwarranted belief that history repeats itself.
Minor Axiom VI: "Beware the Chartist's Illusion". Life is never a straight line. Let us not be hypnotised by a line on a chart.
Minor Axiom VII: "Beware the Co-relation and Causality Delusions." Don't be taken in by coincidences in the market.
Minor Axiom VIII: "Beware the Gambler's Fallacy." There is a gambling theory which suggests that one should put small stakes initially and test their luck, and if these turn out well one should go for big stakes on the dice table. But this is not correct. It only shows that winning streaks happen. But nothing is orderly about it. You can't know how long it will last or when it will strike. Sixth Major Axiom: On Mobility "Stay away from putting down roots. They impede motion". You may feel socially comforting to have roots. But in financial life, roots can cost a lot of money. Have a flexible approach while investing. This axiom implies a state of mind.
Minor Axiom IX: "Do not become trapped in a souring venture because of sentiments like loyalty and nostalgia." Do not develop emotional attachment to your investment. You should feel free to sell when desired.
Minor Axiom X: "Never hesitate to abandon a venture if something more attractive comes into view." Never get attached to things, but only to people. Otherwise it hits your mobility. Never get rooted in an investment. You should remain footloose, ready to jump away from trouble or into a profitable opportunity as and when circumstances demand.

Seventh Major Axiom: On Intuition 'A hunch can be trusted if it can be explained.' A good hunch is something that you know but you don't know how to recognise it. When a hunch hits you, try to locate some data in your mind for any familiarity. Then only should you act on it.
Minor Axiom XI: 'Never confuse a hunch with a hope'. Be highly skeptical. Examine every hunch with extra care.
Eight Major Axiom: On Religion and The Occult'It is unlikely that god's plan for the universe includes making you rich'. You can't only pray that you should be made rich. You will have to work at becoming rich. Mere prayers will not suffice.
Minor Axiom XII: 'If Astrology worked, all astrologers would be rich.' This is self explanatory. Don't trust predictions.
Minor Axiom XIII: 'As superstition need not be exorcised, it can be enjoyed provided it is kept in its place.' In your day-to-day financial matters, act rationally. But, when buying a lottery ticket, give it a full play to amuse yourself.
Ninth Major Axiom: On Optimism and Pessimism 'Optimism means expecting the best, but confidence means knowing how you will handle the worst. Never make a move if you are merely optimistic.' In poker and a lot of other speculative worlds, things are never as bad as they seem - most of the times they are WORSE.
Confidence comes not from expecting the best but from knowing how you will handle the worst. Optimism can be treacherous because it makes you feel good.
Tenth Major Axiom: On Consensus 'Disregard the majority opinion. It is probably wrong'. It is likely that the Truth has been found out by a few rather than by many.
Minor Axiom XIV: 'Never follow speculative fads. Often, the best time to buy something is when nobody else wants it.' This is the best way to get a good stock cheaply.
Eleventh Major Axiom: On Stubbornness 'If it doesn't pay off the first time, forget it'. If at first you don't succeed, try and try again and you will succeed in the end. This is good advice for spiders and kings but not for ordinary persons with regard to financial matters. Every trial is a costly error.
Minor Axiom XV: 'Never try to save a bad investment by averaging down.' If the price of the stock goes down after your purchase don't buy more to bring down' the average cost of your total holding. Investigate why the price went down rather than put good money in a bad bargain.
Twelfth Major Axiom: On Planning 'Long-range plans engender the dangerous belief that the future is under control. It is important never to take your own long-range plans, or other people's seriously.' This is self explanatory and hence needs no comment.
Minor Axiom XVI: 'Shun long-term investments.' If possible try to stay away fro long-term investments. The author noticed that the Swiss group never took a long-term view of their stock purchases. They always sold out as soon as their targeted profit was achieved.