Saturday, April 7, 2012

Blind Spots, Brands

Investing is fraught with traps of low returns, especially in asset plays in India. Whilst it is risky to bat for earnings than assets, market pays abundantly only for growth, hence the calculated daredevilry of buying for earning.

Lots of equities I do or do not own have also grown 50 - 100% in the past three months, eg: Gujarat Reclaim, Cravatex, Ajanta Pharma, Wockhardt, VST Industries etc. I don't own the latter three. Takes five years of twiddling thumbs to earn those returns via Fixed Deposits.

Is it a good time to stay invested ? How can we avoid losing money ? There aren't any simple answers unfortunately.

A few guidelines are of help:

- Avoid Big Mistakes - That means a lot of things, over concentration, over diversification. We can extend portfolio concentration argument a step further, by intensifying our imagination and playing only for gains above 400%+ returns, over next 4-5 years, that way we may avoid value traps.

- Avoid Big Mistakes - It also implies getting around hard problems, instead of solving them - at least in investing if not your spiritual goals. So, let us not predict the next cloud computing winning company.

- Invest in Long Shelf Life products - Ditto for ideas. Ideas that last more than months and years as opposed to playing on budget news. Hey, if budget or summer temperature news works for you, thumbs up !

- Products: Product that touch a lot of lives as opposed to niche offer more certainty of multi-fold growth ,eg: Apple Inc.

- Consumer Advertised Brands over Consumer Brands and Business Brands: While IBM and Intel are amongst top ten most valuable brands, makes sense to partner with Louis Vuitton and Nike as an investor, that don't make it to top 10. While marketing and brand cognoscenti would proffer detailed definitions and fine grained jargon of brand identity, image, equity, value, roadmap, strategy, architecture etc. but in simple terms :  NIKE is better than Tanishq.

Why? To take out from the book of marketing - Brands take time to build, viewing an Advertisement more than X number of times a month re-inforces and sinks the brand in our mind, watching it twice does not count. Simply watching a LOGO / icon / image automatically causes respect and recognition in our mind. This implies, if we watch a certain icon dozens of times a day, its value increases and we are unconsciously likely to favour it amongst alternatives in our next purchase decision.

By this account, even LOTTO or FILA is better than Marico, Dabur not because former are leaders but simply because the wearer of brand is advertising to 100s of others unconsciously and subtly in their next purchase decision, every single day. While an expensive jewellery does not have a logo emblazoned on it for advertisement, nor can I see the brand of moisturiser / hair oil you have donned. The lifespan of company behind ultimate-user-advertised consumer brands ought to be longer than non-advertised as in Shoes vs Deodorant.

- Venture into non Fund stocks : Stocks that are not talked about, spoken about or owned by funds. Be the first land grabber in Gurgaon of 1980s.