Invest talk: Stock picks change every festival

Another Diwali, another list of ‘best buys’ from all the brokers in town. You have new money. Last year Diwali picks? Confine them to the dustbin. Keep buying more. After all, the brokerage industry has to feed on your trades. Diwali, English New Year, New Financial Year and all seem like major events which change the direction and/or quantum of earnings of companies, going by the stock market recommendations. My inbox and WhatsApp groups have a total of around 30 recommendations urging me to put money in their “top ten”. One interesting thing is that these brokers do not seem to have anything in common. So now I have a list of around 100 stocks that are compelling ‘Diwali’ buys. Alas, none of them have also published their last ‘Diwali’ recommendations to see how good their festive forecasts are. Sebi must do something about this. Armed with a hundred ideas, I have just one thing stopping me. I do not have too much money and the brokers have not given me what to sell from my portfolio, so that I could buy in to their new festive ideas. I think it is very unfair on these brokers.

I prefer the Amazon and Flipkart mails that hit my inbox, with Diwali discounts on stuff that I do not need, but with large discounts. No one gives me Diwali discounts on sugar or cashew nuts or edible oil or even the humble daily vegetables. It is available only on ‘smart phones’, wireless speakers and their like. Stock brokers must learn from these sellers. Tempt me to buy shares by offering me a discount.  Now, these brokers will have Diwali recommendation, then the English new year will come round, then Pongal, etc. How much money should I allocate to each of these festivals to buying stocks? The brokers should think of all these things. What if I blow up my entire cash on the Diwali ideas and have no money to buy their “new year” ideas? 

I do not know why an adviser or broker cannot tell us about ‘good’ or ‘high quality’ companies that one should consider owning, instead of telling me to buy and sell. Just give me  a pool of good companies (surely not too many that are worth investing for keeps) and tell me if it is a good ‘price’ to buy. Why have a view on every stock, most of which are of dubious quality, with no mention of promoters, business etc?   As an investor, I have to be on my own, if I have to build a portfolio for the long term. I have to either put the money in to a ‘diversified’ equity fund or in to an ETF (which will mirror the market).  

Sebi has so many requirements to become an adviser/broker etc but I wish there was a way that they are also measured and their quality is up in the public domain. Today, the brokers are not accountable to anyone.  Even the ‘business’ media does not track the ‘sell’ side broker recommendations. For mutual funds, there is evaluation from brokers, from independent agencies and so much micro regulation.  If you are a ‘qualified’ investor in equities, it would be a good idea to make a ‘short list’ of good companies (high quality of earnings, likelihood of surviving ‘long’, good promoter reputation, predictability in their business etc) and build your portfolio out of that. You may like to build your long term portfolio from that ‘short’ list. You could build your strategies to time your buys. This can be discussed in a separate article.  Outside of this ‘investment’ list, the rest would fall in to the ‘trading’ buc-ket, if you are so inclined.

(The writer is a veteran analyst. He can be reached at balakrishnanr@gmail.com)