Story@BFBV: The Anchors Story

Our desire to latch on to the wrong anchors causes us to make mistakes. A Rs 17 stock could be more expensive than a Rs 543 stock. The 17-rupee one may have billions of shares outstanding causing the aggregate market value to be very high when compared with its assets, earnings, and cash flows. An IPO is not necessarily cheap because its offered at a par value of Rs 10 When a stock hits 52-week low it is not necessarily cheap (although it may be a good place to look for value). Don’t sell a stock simply because it hit all-time-high. After all, all 20-baggers would have hit all-time-high long before they became 20-baggers.

Anchor to intrinsic value, not to absolute price, par value, 52-week lows, or all-time highs. You do need anchors in life, but get the right ones to avoid sinking…