Exemplary Assumptions for Business and Stock Investment Strategy

This post is in continuation of the one published yesterday.

1. International politics: OPEC, U.S.-led wars in Iraq and Afghanistan, U.S.relations with North Korea, Iran, and Venezuela, and the transition of governance in Russia, are examples of geo-political developments that affect world stocks. A business strategy should be made on explicit assumptions about the balance of power in the world. Such a strategy needs a review when one country affects the state of equilibirum.

2. National governance: Communists in India, shifts between Democrats and Republicans in the United States, and results of elections in Brazil are examples of domestic politics that can affect stocks in exchanges everywhere. The U.S. has never built a nuclear power plant in the last three decades: India is the last hope for this American industry. The fading of a Washington-friendly government in New Delhi is an internal matter of India, but its effects shake the NYSE.

3. Real inflation: administered prices and subsidies hide the truth. Cost drivers for a particular industry may not even figure in the basket of products and services used to compute official figures. A successful business person or stock investor must have his or her pulse on the elements of cost that affect individual companies. Whimsical and panic trade barriers on exports of farm produce and basic materials are examples of changes in price trends that the business management and stock investment worlds should state as assumptions and monitor.

4. Relevant GDP: boasts by governments about annual growth can be misleading if the previous year witnessed a depression. Agricultural production is a common case in point. Sectors and industries are routine exceptions to the overall economic growth numbers. There may be regional differences as well in large countries. The relevant market size matters more for business and stocks than macro figures. Changes in inter-sectoral growth relationships often drive the best management and investment decisions.

5. Regulation and the competition: business has decisive though subtle powers over regulators in most cases. Industries that depend on the oligopoly of licensing, are affected most by this moat. The telecommunications industry in India is even a duopoly in regions. Power equations change over time, and with that, stocks lose and gain value. Much of business management in such countries is actually about keeping the competition at bay through bureaucrats and their political masters. Business executives and stock investors need inside information about ground realities.

Tomorrow' s post will dwell on five other assumptions that should be explicit before strategy is crafted.

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Flex your stock investing muscles because a tough week starts today.

Stock Investment Goal Management in a Changing Business Environment

Duration distinguishes strategy from tactics in business.

It also separates higher echelons of management from entry-level employees in a business. Your time horizon must extend further in to the distant future as your career progresses.

A retail stock investor is a one-person army. You have to craft strategy and shift tactics as well.

Our concern in this post relates to crafting strategy rather than with tactics of short term stock market operations.

Earlier posts on this web log have dwelt on Goals set after an Environment Scan.

We need triggers to prompt reviews of Goals before we can deliberate on business strategy.

This is best done by making assumptions explicit.

Assumptions relate to uncontrollable elements in the macro environment. They may change at any time, and make our strategies worthless.

A particular strategy is appropriate for a set of assumptions. The best strategies will remain relevant in new conditions. However, a smart stock investor will review matters in any case, whenever assumptions prove to be untrue.

Stating assumptions is an art. We have to reach deep in to our minds. Your help will be invaluable at this point. Let us put heads together and draft assumptions for the world stock market scene of June 2008.

Please post your assumptions below or send an email to

StockWay.MyView@gmail.com

There will be a started list of assumptions here tomorrow.

This web log is updated every 24 hours.

Please visit us often, and bring friends along as well.

Rest well before the turmoil of the stock market week starting Monday June 02 2008.

Exemplary Stock Investment Goals

Earlier posts on this web-log have considered Environment Scanning and Goal Setting as the first two steps towards crafting business strategy. The purpose is to build better stock portfolios, though techniques from the Business Management world are deployed on this web log.

Here are some typical stock investment goals. Please see earlier posts on this web log for a flavor of the thinking that has guided the following goal drafting; the goals are written in descending order of importance:

1. Limit worst-case-scenario losses to not more than 10% of capital over the course of a year.

2. Aim for 25% consolidated returns on investments every year.

3. Limit futures and options to booked profits only: do not use original capital for derivatives.

4. Exit the Investment Services Industry of the United States by December 2008.

5. Move 25% of the May 2008 market capitalization of the portfolio to BRIC countries by the end of September 2008.

Please email StockWay.MyView@gmail.com or leave a post below

with your ideas and comments about goals for stock investing.

Tomorrow's post will dwell on how to craft strategy so that goals are reached as quickly, reliably, and economically as possible.

Thank you for spreading word about this web log to your friends and associates.

The Risk Management Way of Goal Setting for Business and Stock Investment

Earlier posts here have covered Environment Scanning and Goal Setting as
the first steps in crafting strategy.

Goals deserve a number of posts because getting them right is far more difficult than people tend to think.

Large corporations spend enormous resources on setting goals, though they may use different genres of jargon for this essential driver of sustained business success.

Retail stock investors can use Goal Setting to improve personal financial planning.

Optimism needs fine balance in stock investing. We cannot buy stocks without some hope for the future. However, who can be certain about the future?

Most stock market transactions may be seen as differences in views about what the future holds. A person sells stock because he or she feels that future returns are less than alternative deployments of the relevant funds. A buyer differs with this view. Perhaps the buyer does not have the alternatives available to the seller.

The overwhelming subjectivity which dominates stock and business appraisal demands some rationalization. Stock decisions are generally taken by small groups rather than by individuals. Grouping may be informal, but that does not mean any lack of influence. Newspapers and business channels on TV have waged relentless wars on investor minds. The Internet magnifies such powers by sheer reach and accessibility.

A risk management orientation to goal setting helps to make investing strategy resilient.

Listing risks is a first step towards setting investment goals. This will be the subject of tomorrow's post.

Here is a link to a useful book on Risk Management:

http://www.amazon.com/exec/obidos/ASIN/0071357319

Please leave a post below on your experiences with and views about risk management. You can also send a private email to

StockWay.MyView@gmail.com

Thank you for your help in bringing your stock investor friends to this web log. Business Management students are also welcome.

Have a profitable stock investing week, and come back here soon.

Goal Setting for Business Management and Stock Investment

Earlier posts on this web log have deliberated on Environment Scanning. This first step in crafting business strategy throws up multiple options. It is the same for stock investing. Environment Scanning of countries, sectors, and industries will throw up more stock picks than any portfolio can handle.

Goal setting helps to craft strategy. Goals are critical for business managers and for stock investors alike.

What is the big deal with goals?

Is it simply a matter of common sense?

Here are some benefits of goals set by professional business management methods:

1. They are written. This helps all stake holders pull in one direction.

2. They are specified. Each goal should have quality and quantity parameters for strategic relevance. Quantification should be in terms of both cost and time.

3. They have priorities. We love to eat our cakes and have them too. Goals tend to contradict each other. Trade-offs should be transparent in goals set for the crafting of strategy.

4. They are adaptable. Goals cannot be written in stone. They should not change by the minute either. Business managers and stock investors need a process for periodic review and thorough iteration of goals.

5. They are inclusive. Humans are social animals. Any business executive or stock investor who sets goals in his or her head, asks for execution trouble. All members of an organization or investment club should have ample opportunities to debate goals. Criticism must be actively encouraged.

It is best to explain these concepts with examples. You will find a series starting tomorrow. Please contribute either by emailing

StockWay.MyView@gmail.com

or by leaving a post below.

A post will be public. Emails will be treated in confidence.

See you tomorrow, and please remember to bring at least one new friend every time you visit.

The Knowledge, Business Management, and Stock Link

The Delphi Technique is an important step in crafting strategy. It lends the assurance of authority to Environment Scanning.

Please see earlier posts on this web log if you are a first-time visitor, in order to make full sense of this piece.

The Delphi Technique sounds simple when you read about it. All you have to do is to talk to experts. Designers are best for fashion. Researchers should know about new technologies. Economists should be able to predict interest rate trends.

Here is a link for detailed information on the Delphi Technique:

http://www.iit.edu/~it/delphi.html

Here are some tips on how to use the method for top stock picks:

1. It is better to offer the domain experts you choose handsome returns for their efforts. Shares of stock gains would be best. This will guard you against casual and misleading thinking.

2. Use the same people every time you perform an Environment Scan. Once a year is best. It helps to review what was discussed last time, so that forecasting abilities keep getting better.

3. Avoid friends. Settle for nothing less than the best in the field in which you wish to pick stocks.

4. Keep adversaries apart. It is best to meet each expert alone.

5. Do not argue or interrupt. Let thoughts flow. Do ask questions to help respondents confirm their lines of thinking.

You now have (if you have followed all the posts on this web log related to Environment Scanning) a strong platform to move towards the next major step in crafting business strategy for stock investing.

This relates to setting objectives.

Please return tomorrow for a post on this crucial strategy crafting step.

Thank you for your comments as well: you can email

Stockway.MyView@gmail.com

or leave a post below.

Your friends and stock investment club members are welcome at this web log as well.

Brand and Stock Value Links

This post is in continuation of a series on Environment Scanning for the craft of Business Strategy. Earlier sections are on this web log.

The purpose of this web log is to apply Business Management methods to stock investing.

The focus on this post is on how branding is a significant parameter of Environment Scanning for Sectors. Each sector has a number of industries. Moving sequentially from sectors to industries helps to make top stock picks.

Branding matters for every organization. There is no business without a customer. The latter's mind determines core and sustainable financial performance of all stock.

Branding for industrial clients is easier than for masses of consumer. A management team can meet regularly with key clients to find out their needs and perceptions. The nuclear power industry in the United States is an extreme example. The country's Navy is virtually the only present customer. That is why the industry so persistently supports the construction of nuclear plants in India: they have no hopes of other paying customers!

Now let us go to the other end of the branding pendulum. Consider the Apparel/Accessories Industry. It is part of the Consumer Cyclical Sector. You have to forecast fashion trends to succeed in this type of business. The best executives may falter as new generations of customers take over the bases of cash inflows. You can conduct a random survey and still have incorrect results. The ability to stay in tune with the thinking of unknown faces is a success driver for stocks in the Apparel/Accessories Industry.

Use the following link to see branding in action in this industry and how it can affect stock values:

http://www.stockmarkets.com/blog/a-stock-that-looks-inside-young-minds-part-1


Branding is closely linked to market segments. A stock investor has to scan the environment and make picks of organizations which excel in branding. This implies not only customer insight but sensitivities to trend changes as well.

Stock market regulators do not have any measures of branding. They do not even require that brands are valued and entered in lists and accounts of assets.

Private equity uses this regulation lapse to build moats and to keep small retail stock investors away. They consider venture quality to be more important than even celebrity executives, in picking stocks for their bottomless pits of capital.

Venture quality and branding are nearly synonymous. Both these forms of Business Management jargon deliberate on why customers buy products and services.

You can fly over the cuckoo's nest of misinformed retail stock investing. Visit the following link:

http://www.sba.gov/advo/research/rs315.pdf

What do you think of branding? Do you use this as a factor in making top stock picks?

Please email stockway.myview@gmail.com or leave a post below.

We have covered politics and Environment Strategy in yesterday's post.

What comes after branding?

Domain expertise is another predictor of Sector shifts in the economy. Today's top stock picks may be unprofitable tomorrow. Current losers may be the highest growth achievers in future. The Delphi Technique is the Business Management way to Astrology of Stocks.

Let us celebrate the NASA landing of another spacecraft on Mars with a post on the Delphi Technique tomorrow.

Sectors and Stocks

Please read the post before this one if you are a first-timer on this web log.

Today's post is on Environment Scanning of Sectors in order to make top stock picks.

It helps if you follow politics, because nothing affects Sectors more.

You may like to think that technology drives the Healthcare Sector. However, a government may favor copiers, and thereby penalize stocks that depend on patents.

The Communist movement in India has destroyed all hopes of the dying uranium industry in the U.S. However, even stocks of the most polluting and obsolete nuclear power companies in America will benefit if the 2009 elections return another Washington-friendly government in New Delhi.

Argentina, Peru, and Venezuela are other countries which affect stock markets in both the U.S. and Canada, every time they move a little left of their national centers of politics.

The effects of politics are not always negative. U.S. corporations stand to gain the most once the Fed lifts sanctions against Cuba, Iran, and North Korea. That is also why the U.S. has never taken punitive actions against China, all the way from Tibet to Tiannamen Square.

Do not worry if you are a novice at politics. Here are two typical links to study equations between Sectors, politicans, and your stocks:

http://www.opensecrets.org/

http://www.independent.co.uk/news/uk/home-news/blair-used-irresistible-pressure-to-halt-investigation-into-baesaudi-arms-deal-782541.html

Politicians are not the only villains of Sector effects on stocks. Sectors are made of industries. Some industries are driven by brands.

Branding and stock links are subjects for tomorrow's post.

Thank you for returning tomorrow to continue a dialog on the profitable business process of Environment Scanning for crafting Strategy.

Please email

stockway.myview@gmail.com

or leave a post below if you would like to contribute your insights on how politics affect stocks of specific Sectors. Inputs or any other matter are equally welcome.

Trade safely in the volatile markets of Monday May 26 2008: rest well if you invest in the U.S. stock market, while your peers in other countries have a memorable working day.

Use Strategy for Stock Investing Like a Business Management Guru

Soldiers understand strategy better than executives.

Nevertheless, strategy has become a buzz word in the Business Management world.

You can use strategy to pick top stocks.

Strategy, whether in the battle-field or in business, is a process. It is only rarely a sudden brain-wave. Strategy is best crafted by process.

The first step in crafting business strategy for a management team is to scan the environment.

Large corporations use specialists for Environment Scanning. Amateurs go through this process in their heads.

Systematic and effective Environment Scanning need not cost you big bucks.

You can start the process today and use Environment
Scanning to improve the stock basket in your portfolio.

Start with countries. Are all your investments in stock exchanges from the country where you live? Consider stock markets in the European Union: the Eur o is currently one of the best-managed currencies around.
The financial sector has sullied the name of stock markets in the United States. However, NASDAQ has some exceptional Technology stocks. AM EX continues to be a world leader in commodities, especially farm produce and livestock.

All BRIC countries deserve serious consideration. Take a look at:

http://www.stockmarkets.com/blog/new-kids-on-the-stock-market-block

You can turn to Sectors once you have scanned countries for your stock mix.

Please come back tomorrow for tips on Environmental Scanning for Sectors.

Send an email to

stockway.myview@gmail.com

or post below if you would like more information on stock investing in a particular country.

Have a restful Sunday.

Buy Energy Sector Stock Now

You can find top stock picks in major economies.

The crude oil price has ruled the stock market during the week ended May 23, 2008.

Most stocks will continue to ride up and down as world politicians negotiate prices with OPEC.

There are signs that the United States has lost its clout in this regard.

Companies with domestic energy resources in the U.S. continue to offer great stock values.

Here is a link to an article on this subject:

http://www.stockmarkets.com/blog/the-safe-harbor-of-oil-gas-operations-based-in-north-america

The strongest economies in the world have national stocks in which you can invest.

Here is a link to the energy scene in China:

http://www.chinatrade.com/

Politics in Russia has a strong base in energy. The country has built stable stock values around oil. Here is a link for some investment ideas:

http://www.themoscowtimes.com/article/1038/42/362841.htm

India is more difficult to understand in terms of oil price effects on the stock market. However, here is a link to a stock in which you can invest with relative safety:

http://www.ril.com/html/investor/investor_handbook.html

My core message for today is that you can gain by investing in energy sector stock.

Send an email to

stockway.myview@gmail.com

or post below if you would like to know more.

Have a nice Saturday, and please come back to my web log tomorrow.