For ages people may have ridiculed man’s thought of flying. Forget
cumulative flying. Do you belong to the herd who think human capabilities are limited?
Towards Utopia
Most people exhibit rationality when they purchase consumer
durables or spend on automobiles and other discretionary items, but fail to adhere
to a rational approach while investing.
What do most investors look up to when they consider an investment
in Equities?
Price
Price and Price….
Should not be Price be looked at with a relative perspective
of Value? Most people do not understand Value. Most people suffer investment losses
in stock market as they chase Price and not Value. Price distorts Value. But we
cannot do away with Price. Price creates wealth generating opportunities for
prudent few at the expense of others. So is there a way out to force people to
look out for Value in stocks keeping Price aside.
Investors can be forced to look at Value in a stock and not Price
if Price wasn’t available for a certain period say 2-3months. Price is a
function of Future Earnings. So shouldn’t investors look at the drivers of
earnings? Would not be people then be compelled to look into- financial
statements, business models, revenue visibility, Management quality, porters 5
etc?
Can delisting for a
certain period assist in restoring rationality? Price would then converge into Value
as it approaches the so called planned delisting day. Price will also be
resurrected on the day it is relisted by price discovery mechanism. Delisting periods
or rationality injections would help settle froth and apprehensions in stocks. News
(in particular Noise) would perhaps get absorbed in a more subtle manner.
Operationally, the burden on Stock Exchanges would increase. Exchanges
with/without the consultation of companies can determine the time line for
delisting and relisting.
Currently we may consider our market and market participants
immature. But someday we all need to wake up and gradually evolve ourselves
into more mature participants. Thoughts are easier, actions are tougher. This
calls for the Tough to get going. Sometimes it’s just starts with a small snow
ball that eventually turns into a huge avalanche. This is just the beginning…
