Common Sense Investing: A Casual Guide

Common sense investing goes beyond just crunching numbers and studying data; it’s about nurturing a practical perspective that can empower you to make informed and sensible investment choices. In this article, we take a dive into the world of common sense investing and how it can pave the way for long-term financial success.

The Context

Stand high enough on a pile of trash and you may be able to spot your next multi-bagger — PlanB

Retail investors are forced to believe that spotting remarkable companies is an impossibility in today’s modern environment. Simple things are being packaged, promoted, and marketed in an extremely sophisticated way.

These remedies are repeatedly being sold to dreamers who are fearful of getting their hands dirty. Occasionally, this focus on complexity tends to turn the majority of investors away from simple facts.

This is particularly true when we just ignore the clues that are right there, hidden in plain sight. Value investing in its truest sense is around the capacity to make simple decisions based on sound research. Data, observations, and most crucially common sense are the main drivers behind these simple choices.

Finding fantastic prospects is easier than you might imagine, even though valuation research must ultimately guide your decision to buy a unique stock. The common sense investing strategies that you are about to read will act as bottom-up procedures to affirm your investing hypotheses. You can use these suggestions to create your own private watch list that will be worthy of deliberation and analysis.

1. Scouring through trash

Finding outstanding FMCG companies that are in high demand using this method is by far the most empirical approach.

Did you know that trash and toilets are the best places to spot fortunes? We will cover toilets towards the end, let’s deal with the trash first. It’s not a proposal to Sherlock into your neighbor’s garbage, but rather to keep your subtle guards on when you see those crumbs lying around.

The prominent visibility of empty FMCG wrappers in the trash, specific to a product indicates higher consumption. While doing so, you will periodically observe a few pieces of merchandise over and over.

A few examples are those easily identifiable brands like-

☑ Maggie (#NESTLEIND)

☑ Cigarette Packets (#ITC; #VSTIND)

☑ Shampoo Bottles (#HINDUNILVR)

☑ Pizza Boxes (#JUBLFOOD), and

☑ Pepsi pet bottles (#VBL), etc.

So, the next time you look around- do recall this recipe and you will be in for a surprise. Please maintain a safe distance for the sake of hygiene and don’t go overboard with this one. This also does not imply that you start booting trash cans around while doing your fundamental research.

Stay responsible and keep your city clean!

2. Stay observant at traffic signals

If you employ this easy method, traffic congestion won’t ever be irritating. This approach is a great way to spot the largest-selling automobile brands that are listed on our stock market. As you wait patiently for the light to turn green, figure out the brands that you see most prominently around you.

☑ Is it Maruti (#MARUTI) or Mahindra (#M&M)?

☑ Are there any new vehicles in your sight?

☑ What brand are they?

Well, now you have a live perspective of what’s going on with demand in the auto sector.

Do remember to obey the traffic rules during your explorations!

3. Check out the drugstore

You may call this the Odd Subscription common sense investing strategy. This strategy works well with stocks that fall under the Pharma sector. Since we didn’t reference Netflix here, you might be wondering what the word “subscription” means. Let us explain.

We classify drugs into two broad categories — Course medication and Subscription medication. Course medications are the ones that are usually consumed during the onset of certain symptoms like the common cold and flu. The sales of these drugs have an element of seasonality.

The flu medication is in high demand during the flu season from Jan-March. Similarly, allergy medication peddles well from April to June in northern India. Once the patient is cured, the drug is often weaned off. The second class is called subscription medication.

Unfortunately, these medications are forever. Most patients use these medications to treat symptoms of various, incurable illnesses. A few examples are some top-selling prescriptions:

☑ Lantus (#SANOFI), and Mixtard from Abbot (#ABT) for managing Diabetes

☑ Thyroid Medications like Thyronorm (#ABT)

☑ Asthma Medications like Aerocort (#CIPLA), and so on.

When you enter a pharmacy, keep your investor wits about you and take a quick look around to observe what kinds of prescriptions are kept close to the counter. To optimize time & motion, some drugs are kept close to the cash register.

Meaning, that the shopkeeper doesn’t want to move around too much to dispense these medicines. It’s simply because they are dispersed at a higher frequency in comparison to others. Stocks dealing in subscription medication usually have a compounding effect on investments. They exhibit consistent sales owing to patient loyalties and license monopolies.

Stay healthy and stay safe.

4. Check out the hardware shop

Investing in real estate is a high-ticket ambition. It is thus, not a piece of cake that any retail investor can afford. In addition to being expensive, it is comparable to betting on gold during the gold rush when there is little to no chance of really discovering the precious metal.

How about investing in shovels instead?

This is an excellent common-sense investing strategy for identifying construction material-related investment opportunities. Ask about the primary materials that are selling the most if you frequently visit a hardware store.

☑ What’s hot in the Bathroom and Sanitary fittings (#CERA or #KAJARIACER)?

☑ Is it a specific brand of Cement-like (#ULTRACEMCO or #AMBUJACEM)?

☑ It could be the raw material used in interior designs like Gypsum boards

☑ It can also be Paints (#ASIANPAINT), Electrical fittings (#VGUARD), or a bonding agent like Fevicol (#PIDILITIND)

5. Value the opinions of overlooked authorities

The actual experts on white goods are not those seated in corporate headquarters, but rather those who are working in the field. White goods are electrical goods used domestically such as refrigerators and washing machines, typically white (in color).

Any white goods company may establish customer loyalty through after-sale support, which is spearheaded by service engineers. It’s typically a good practice to engage in conversation with repair professionals if you chance to schedule service requests for appliance repairs. This is the army that puts forth a lot of effort to help many businesses maintain their audacious foundations.

You may ask about the best Air Conditioning brand or maybe about the most efficient refrigerator.

A service engineer’s feedback is the purest form of actual product reviews.

Their hands-on product knowledge always serves as a brilliant source of data for fundamental analysis. If you give it a try, you’ll get some fantastic clues for your investing watch list.

6. Take a restroom break (Yes!)

When was the last time you gave your restroom a thorough inspection?

Not the tidiness but rather identifying cool brands from an investor’s perspective. They say the toilet is the best place to think, but we also believe it’s a wonderful place to look for investment ideas. Several well-known brands can be seen in regular Indian restrooms:

☑ Tiles — Somany (#SOMANYCERA); Kajaria (#KAJARIACER)

☑ Disinfectants — Savalon (#ITC), Domex (#HUL)

☑ Toothpaste — Colgate (#COLPAL), Pepsodent (#HUL)

☑ Shaving — Gillette (#GILLETTE), Godrej (#GODREJCP)

☑ Soaps — Lux, Dove (#HUL), Fiama (#ITC)

☑ Shampoos — Pantene, Heads, and Shoulders (#PGHH), Sunsilk (#HUL)

☑ Hair Oils — Hair & Care, Parachute (#MARICO), Dabur Amla (#DABUR)

And many more. If you just use your common sense investing beacon, you will uncover a tonne of hints by just looking around.

Conclusion

There are numerous methods to carry out bottom-up analysis for each area, even if the examples above are industry-specific for the FMCG, Auto, Pharma, Construction, or Appliance sectors. Your daily exposures will eventually determine the viability in full.

With such tactics, high net worth (HNI) investors frequently outperform regular investors by a wide margin. These are the people who aren’t afraid to go to factories and enterprises to conduct basic research.

This radical approach works best if you decide to invest a sizable amount of money in a particular company. Nevertheless, the common sense investing method works just as well for the majority of enthusiastic retail investors. So why not begin your bottom-up analysis right now and look for those multi-baggers that are already in your line of sight?

Note: Any examples included in the literature are merely for illustration and not as investment advice.”#” suggests a stock ticker on BSE & NSE.

We would love to hear about your smartest street strategy that helps you with your stock selection.

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“This information is for educational purposes only and should not be considered investment advice.”

Invest wisely!