Tight Credit Conditions Benefit Business Managers and Stock Investors

A corporation, a partnership, or a proprietary concern can all work with their own funds. They can also invite others to share in ownership. Merchant banking is not an essential service.

All countries have regulatory central banks. It would appear from media reports that they have nothing else to do apart from changing lending rates and conditions.

Economists say that interest rates and industrial growth are related. Bank funds do result in growth, but the benefits may not be distributed equitably. You and I are powerless to change this, but tight money conditions need not be all bad.

A serious stock investor can use difficult fund conditions to pick top stocks. Firstly, it is an appropriate occasion to shed under-performing stocks. A portfolio can change for the better in difficult stock market conditions.

Bank managers are generally slower in raising pay-outs on deposits than on raising charges for money they lend. Divert your savings to stocks with durable values, when banks pay less than the rate of inflation.

That is one example of how it can make sense to stand up to a stock market bear.

Tight money conditions encourage managers to think more about the cash they waste. Consider how the oil marketing companies have curtailed advertising during June 2008. Only M. S. Dhoni and Narain Kartikeyan lose if India does not promote branded fossil fuels.

Some sales-dominated companies buy customers with credit rather than with their own products and services. Banks do them favors by raising interest rates, and by refusing inflated credit lines.

It is the same with inventory. Which warehouse does not have slow-moving items? Tight credit conditions remind managers to visit their godowns once again.

Do you need some tailoring to adjust to your central bank directives? Post below or email StockWay.MyView@gmail.com

Dividend Regression for Stock Picks Amidst Bears

Subsidiaries of global corporations are best examples of stocks for which you can expect dividends to climb like a jet in any weather. It is an important route for the real owners to get their hands on cash from operations in other countries. All demands on cash are subservient to the aspirations of group companies. Dividends of such corporations are nearly assured. Here is an example of a stock with 200% dividend in the face of pedestrian market share performance:

http://www.pharmabiz.com/article/detnews.asp?articleid=44218&sectionid=5

Since online trading has become hazardous nowadays, your time can be spent more profitably by making graphs of dividend histories. All you need is a likely dividend that beats the bank interest rate. Fortunately, this genre of stocks will also allow you exits with handsome gains once the market stabilizes again.

Please post below or email StockWay.MyView@gmail.com if you know of a stock that has a stable dividend record.

Companies with undervalued assets are other targets for a discerning stock investor during a recession. We will debate examples tomorrow.

Signs of Great Stocks

We considered top stock picks for turbulent market conditions, yesterday. U.S. auto manufacturers are frightening examples of how blue chips of the past can have bleak futures.

Nothing is forever in the stock market.

No stock issues guarantees against price declines.

Sustained stock market success demands that investors must think like doctors. Think ahead. Do not be misled because patients say that they are fine. Make a thorough examination. Use the best diagnostics on offer. Arrive at a diagnosis. You can provide symptomatic relief in an emergency, but management without an established understanding of the cause will not lead to a durable solution.

You can use concepts of medicine even if you are not a doctor-not to practice quackery, but to survive in the stock market.

The term ‘cash is king’ has come back in to fashion as the penultimate week of June 2008 trading unfolds.

It is opportune because cash flow changes herald future changes in the fortunes of stocks.

Retained earnings, buy-backs, early loan repayments, titles to natural resources, hedging in favor of limited materials, protection against badly governed currencies, and cost re-engineering, are positive signs. Reverses are equally true.

Exit blue chips that exhibit negative signs. Divert your portfolio to stocks managed by professionals. Forget indices, today’s stock exchange, and day trading.

You can also switch your TV from business to music.

Emergency Stock Investment Advice for the Week Beginning June 23rd 2008

There have been informal suggestions that this kind of guidance would help small stock investors more than academic posts on business management strategy. The situation during the week ended Friday, June 20 2008 suggests that many organizations and people must be in quandaries over what to do with stock portfolios.

Here are some tips. Please post below or email StockWay.MyView@gmail.com if you would like to know more about any of the following suggestions:

1. Buy stocks of corporations that have decades of unbroken dividends.

2. Favor companies that make essential goods and services.

3. Look for global corporations that have shares in the United States, Japan, the European Union, and the BRIC block.

4. Focus on companies with safes full of patents, and balanced revenues from proprietary brands, as well as from large-volume generics.

5. Study balance sheets so as to pick stocks with strength to withstand market volatility.


Here is an example of a company with which I have been associated for all my professional life, and which has never let me down:

http://www.novartis.com/

MBO Infrastructure for Business & Stock Investment

MBO is a way of life more than a business management method alone. The wide gap between the MBO way and normal functioning may be a major reason for its neglect in conventional business.

Here is a reference to a book that you can use as a reference to implement MBO:

Drucker, P, 2007, The Essential Drucker, Butterworth-Heinemann

The rest of this post will dwell on work habits that can help a stock investor graduate to MBO.

Recording, Reviewing, and Restriction are the 3 Rs of MBO.

Objectives must be written down.

Performance should be measured regularly, and preferably independently.

Resource limitations should be stated expressly.

Why is any of this different from common stock investing?

Do you have written objectives for your stock portfolio?

Who reviewed your alpha and beta last?

Are authority limits, finances, hardware, time, and knowledge resources specified?

You will see that MBO takes time but costs nearly nothing. Anyone can learn the skill. An MBO-directed stock portfolio is unlikely to lose more than you can afford. It protects you by defining a worst case scenario.

MBO helps you implement strategy in a risk-management ambiance.

Post below or email StockWay.MyView@gmail.com if you would like some help with applying MBO to your stock portfolio.

The stock market scene of June 2008 is one of great crisis. We have to leave general thoughts on strategy aside, and try and put together an emergency plan for the rest of the month.

Please come back tomorrow, and let us put our heads together.

A Standard for Business & The Poor

Management Guru Peter Drucker first described MBO more than half a century ago. It is not part of most business school curricula, and even rarer in contemporary business practice.

There is no compelling argument for MBO to have fallen out of fashion. It is effective, and does not require large cash outlays.

MBO is a standard for business and the poor. It suits small stock investors, business enterprises that cannot afford expensive executives or consultants, and everyone who wishes to create commercial value out of intangibles.

MBO benefits transcend profits. All organizations and individuals can deploy MBO skills for improved performance. MBO levels the playing field for the Davids of this world. You can trade against private equity in a stock exchange with MBO by your side.

MBO transforms self and thinking. It can make you a social outcast. Why is this? MBO is like a language or a script. People who do not use MBO feel threatened by a skill that they lack. This may be a reason for the decline of MBO in the business world. It is not any established way of playing the stock market either.

You can use MBO to stand apart. It may not help with your popularity, but it certainly can improve your stock portfolio.

We will start a new series tomorrow, applying MBO step-by-step to stock investing strategy implementation.

Your posts and mails to StockWay.MyView@gmail.com are always welcome, and you are assured of responses as well.

Execution Excellence Delimits Business and Stock Strategies

A poor strategy with disciplined execution is better than a superior strategy that remains on paper.

Crafting strategy takes time and money. It is better to focus on operations if commitment to abide by agreements are lacking.

The best way to implement strategy is to make action plans. The latter should identify responsible people, and set quantity, quality, cost, and time targets.

Management by Objectives (MBO) is a rather old-fashioned but highly effective way of ensuring implementation discipline after strategy has been agreed.

MBO is ruthless and exposes all cases of prevarication without mercy. Perhaps that is why MBO has gone out of fashion in modern offices staffed by salaried personnel.

MBO life is easier for stock investors because they work alone or in small groups.

Let us start a new series tomorrow on MBO for stock investment.