BC TRADING
Saved by @Shubham51ngh

1/ Lessons From The Tech Bubble:

Last year, I spent my winter holiday reading hundreds of pages of equity research from the 1999/2000 era, to try to understand what it was like investing during the bubble

A few people recently asked me for my takeaways. Here they are -

 2/ Every document hereon comes from my former employer Bernstein Research's internal research archive, which extend back to 1994

Unfortunately, they're not available to the public (even Bernstein's client website cuts off at 2003), but happy to give more details if necessary
3/ LESSON #1: Everybody knew it was a bubble

Unfortunately, the quip "it's not a bubble if everyone says it is" just isn't true

Investors were comparing the internet sector to tulip mania as early as mid-98. Bernstein held an entire conference on it in June 99!
4/ LESSON #2: Calling bubbles is easy, making money is hard

In truth, the hard part about the tech bubble wasn't noticing it. The hard part was timing it

Our equity strategist tried in January 99... he was off by 14 months (and another 30 point gap in value vs growth)
5/ LESSON #3: Nobody knew the bubble popped until months after it did

Nobody noticed in March 2000 when it finally popped. Our equity strategist (who bet his career on it!) didn't catch on until June
6/ LESSON #4: "Tech" bubble was a misnomer... it was really a large cap growth bubble

See the valuation table below, 1 year before the top

Yes, Microsoft traded at 70x earnings. But Coca Cola was 43x. Pfizer was 92x. Every stock here was a disaster over the next 10 years...
7/ LESSON #5: Most large cap tech stocks in the bubble had real businesses with strong fundamentals

The internet stocks were a sideshow. In 2000, the software sector had a $1 trillion market cap, 20% net margins, 20% annual growth

The problem? It was trading at 16x sales
8/ LESSON #6: Fundamentals follow price, not vice versa

The bubble popped in Q1 2000. Fundamentals didn't decelerate until Q4 2000.

It was reflexivity at work. Lower stock prices = less capex spend = less revenue growth = lower stock prices. A vicious cycle
9/ What's the takeaway here?

Be humble.

For bears, it's easy to call a bubble. Anybody can do that. Timing is the hard part

For bulls, it's easy to point to the fundamentals. Historical investors weren't dumb. The hard part is matching fundamentals with price...

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On this auspicious day of #GuruPurnima, happy to share an easy to read and an exceptionally worthwhile investment. I plan to make a thread that will hopefully help us invest and live better. Thank you @awealthofcs 🙏🏻


Experience has taught me that less is always more when making investment decisions. Simplicity trumps complexity. Conventional gives you much better odds than exotic. A long-term process is more important than short-term outcomes.

And perspective goes much further than tactics. Tactics are useless to investors in a matter of days—sometimes in a matter of hours. But perspective is something that stays with the investor for a lifetime. It allows you to adapt to the changing market and economic landscape.

While keeping it simple won’t make it any easier to predict the future—no one has a crystal ball—it can give you the necessary capacity to make rational decisions, no matter what happens next.

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THREAD ON DELTA (The most important GREEK)

Many traders don't indulge in understanding GREEKS because they think they are very complicated.

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Delta
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Vega

In my experience, understanding DELTA is enough to take benefit of greeks.(1/n)

Delta measures the rate of change of options price based on the directional movement of the underlying.

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Value of delta varies between 0 & 1 for calls and -1 & 0 for puts. This figure tells how much an option price will change, when the underlying moves 1 point. So example a delta of .2 of call indicates that for every 1 point change in the underlying, the price will move .2 (3/n)

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A small thread on momentum investing and how I practice it.

I use the Nifty 500 universe for selecting my momentum stocks. Nifty 500, as the name suggests, has 500 companies in it. WRONG !!!! It actually has 501 companies. Yes, I double-checked 🙂 So, these 501 companies is

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Ok. So, exactly, did I go about doing that.

Step 1: Start with Nifty 500 universe (501 companies)

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less than 1 year. This eliminated 25 companies (see table).

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gain that each of those stocks have earned. I found out the following:

a) Average return of all the 476 companies was 43.27% (meaning if their average price as on March 31, 2021 was 100, then their average price as on March 31, 2022 was 143.27)

b) Out of these 476 companies

140 companies, gave a negative return.

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Option Trading is very difficult to master as there are so many things to understand.

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A complete course worth Rs 50K for free.

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