Thursday, January 29, 2009

The Crash - Best Time To Find Wealth Creators!

If I remember correctly, somewhere in October 2000 a certain company’s stock was quoting below Rs. 10. The same stock was quoting at over Rs. 410 in November 2007.

In hindsight this looks like a great company and anyone who would have invested in this company would be very happy and probably much richer too. Right?

The reality is very different from that of course. The world of investing is all about determination, belief and patience. I remember how many people would curse this company and several people even lost money in it.

In fact, people who had bought this stock in January 2000 at Rs. 19, were cursing it when it had come down to around Rs.9 in October 2000. I know of many people who exited it that time out of frustration and panic at barely Rs. 10 and Rs. 12, thanking their luck for having recovered their capital. They were cursing the stock markets and everything related to it.

There were talks about a terrible economy and how everything is headed for doom. A lot like now. Ketan Parekh scam and IT spread gloom and depression in those days. Now it is Satyam - Raju, Real Estate and sub-prime.

But the very small minority, who used their logic and studied the business, realized that even though things might be bleak at the moment – the future isn’t bleak. The small minority who invested and held on to the company, surely went onto create a lot of wealth. Even today after a major correction, the stock is around Rs. 240.

People who create wealth, do things that others don’t. It takes a lot to be able to listen to yourself and follow what your heart tells you. It takes effort, time and research. But let me tell you that, it is one of the best things you can do.

Now many of you might be curious to know which company I am talking about. Any guesses? It is quite a well known public sector bank and it is also quite possible that many of you have an account there. In fact, I and my entire family have had an account in this bank for over three decades now. I am talking about Bank of India.

I was not able to buy it at Rs. 10 in those days, but managed to buy it at an average price of almost 30% higher, at around Rs. 13. We all need to remember that it is impossible to buy stocks at their lowest possible price and sell it at their highest possible price.

Today when we look back, prices of those days seem dirt cheap. But in those days people’s vision was clouded by pessimism. And in fact public sector banks were even more hated. There were theories about how the private sector will eat up every single public sector bank. However, I had noticed that public sector banks were changing and improving their service, decor, presentation, etc. In addition to that they had a healthy balance sheet and still most people continued to have a personal trust in them. Those were some of these reasons that made me buy it.

Imagine if you had Rs. 100 in those days in a Bank of India FD. How much would that be today? Now what if you removed Rs. 10 from the FD and put it in the very same bank’s stock. A major part of your capital would be protected in an FD, while a small part would be working harder and would go on to grow even more than your initial capital. Right? Investing is all about taking a little bit of risk, knowing that you might have to wait for a few years, so that you can get superior returns. Besides Bank of India, there have been several companies that have given extra ordinary returns and all of them were picked up before 2003. Spend some time, trying to learn more about them and that will help you understand the present situation better.

I sold all my holdings in Bank of India at an average price of around Rs. 360 sometime ago. Not at the high, I know, but you can never sell at the maximum. We need to realize this fact – and only then can we be satisfied investors. The reason, I sold was because I had once again found a few other opportunities and wanted to have as much cash as possible to benefit from a situation of extreme pessimism and depression.

As you can see a Crash is the best time for me to make Cash and today, once again we too can cash the crash. Valuations are going to get even cheaper than they were back in earlier crashes and that means a few good companies are available at prices that are almost unimaginable – and there is a possibility that they get even cheaper.

I hope each one of you benefits from this opportunity and five to six years from now fully enjoys the fruit of your decision. Please do not miss this opportunity and make sure you arm yourself with the needed knowledge and look at 2009 as a chance to start accumulating future wealth creators now. It is a rare opportunity to have so much pessimism all over the world, I am sure by now many Happionaires would have realized that even more can be made times like these.

Sometime ago I shared with all of you how I was accumulating a public sector company, which was rich in Cash here. There are over a dozen such companies available in the market, which have assets worth almost 600%-800% of their current market price. I am sure you will be able to find them on your own based on the principles and tools shared. It is very easy to find such things, when there is a scarcity of cash around.

Also please remember that having limited capital or no capital, is no excuse to miss out opportunities. Laxmi Mittal did not have a lot of money when he bought sick steel mills, I started with only Rs. 750 and most other people who have the knowledge have often not had the capital. Laxmi always finds a way to go to people who have Saraswati and the strong belief in what they are doing and a burning desire to get what they want.

Do not give up hope and make sure you cash the crash.
Keep smiling and happy wealth creation!

Yogesh Chabria

Read what Happionaires had to say about Raju's Dirty Secret!


Anonymous said...

Very true. I remember that crash but sadly i fell for the crowds. This time I won't.


Anonymous said...

This is pretty amazing. Had never thought Bank of India would have given such great returns.

I think it is best not to be depressed because of bad news and look for opportunitties and possibiltites.

Will share this very nice post with all friends. Thanks Yogesh and am waiting eagerly for Cash The Crash to get some more such gyaan!

Anonymous said...


I must comgratulate you for the knowedlge you have gained over the years. I have not got hte chance in the past to pay attention to such things. But now i find myself very lucky to be in your company.

I read your book after reading your writings here. Got to learn a lot and now want to go ahead on this journey.

Thanks for making us smile and at same time empowering us financial awareness and knowedlge.

Anonymous said...

Hello Yogesh Sir,

Very knowedgeable post for the type of market we are in.

I also got your report and it has lots of good tools to learn from. But Sir, can you please share more. It is still hard for someone just new to find such gems and you can share them with us.

Please do share a few more.

Anonymous said...

Dear Sir,

I got a chance to read your book Invest The Happionaire Way after reading your gems here on your blog and hearing about you in the media.

I am feeling bad that I read your book so late, because had I read it when it came out I could have told my friends about the coming property crash as you had predicted.

Profits for real estate players are down over 95% (Parsvanath).

Based on your teachings, I have started learning more and this time will buy Cash The Crash as soon as it hits stores!

One more thanks from your die hard fan.

Anonymous said...

When is CTC going to be out? You are the only person out there who is actually talking about hope and how we can make the most. Hope more in the media had the power you do to inspire.

- AB

Sunil said...

Sir you have given a good example of BOI, cause since past few years I too have been tracking this company but never had oppurtunity to buy at low levels. During this crash these PSU's have been standing strong.
I too am a strong beliver of that "The best of the Investments are made during the worst of the times".
Anyone and everyone who will seize this Oppurtunity will definetly not regret

Smita said...

Kaash I had lods of money...but on hindersight I wouldn't have invested it in stock market even plain scared :)

Anonymous said...

Respected Sir,

Agree with Sunil and others here. BOI is a good example of how right investing can help create lots of wealth. Same money in BOI FD would not give as much return as only Rs. 10 in BOI stock would give. Please continue giving such knowedlge to all of us who do not have the same experience as you.

Smita, do not worry and simply learn more and invest. Stocks are not as risky and i suggest putting only say few hundred or maybe one or two thousand to start learning a bit more.

Anonymous said...

Respected Sir,

I read your first book and loved it. It got me thinking about a lot of things and made me realize how important it is for me to learn about investing. I am eagerly waiting for your next book too and love your style of writing.

Please launch your book out fast so fans like me can learn faster.

Anonymous said...

Sir I am an avid reader of your blog, articles and loved your first book.

I am waiting for Cash The Crash very much and as mentioned by a few other happionaires already, that I hope this book helps us learn more concepts. The books suggested by you - were very difficult to understand and not like the Happionaire series.

Thanks for making things so much simpler and putting smiles on the faces of all of us!

Anonymous said...

Wonderful cover for Cash The Crash. I just saw it on the main site and also found the writings from the book very exciting. Makes me even more curious to read your next book.

I never knew I would be so excited to read a book on finance. This too would be a huge bestseller like ITHW! :-)