Idea No 4 : There is no thing called right investment . It is all circumstantial

Investments  move through cycles of  popularity and pessimism . These roller coaster movements of investment instruments  provides opportunities for active investors to out perform market .

But the challenge for value investors is that they under perform in bull market and outperform in bear market (as often value investing is more focussed on buying at right time vs selling at right time ) .


So how can Value investors increase chances of winning even in a bull market ??

This is where Idea No 4 is relevant . There is no thing called right investment . It is all circumstantial


The basis of this idea is "While most investment instruments do have cyclical boom and bust , fortunately  they may not synchronize "

Some interesting examples are ..

1) Rate sensitive stocks vs Consumer Staples
2) Bonds vs Stocks Vs Gold
3) Importers vs Exporters of Goods
4) Producers vs Consumers  of commodities

Often in many years the boom and bust of these investment instruments may be contra cyclical or may lead or lag one another . This allows value investors to book profits in overvalued sectors and move to under valued sectors .

In Indian context some interesting counter cyclical opportunities were created  by

1)   Indian FMCG stocks vs Infrastructure stocks in 2005 - 2007 and post 2008- 2011 

2) OIL E&P stocks  vs Oil Marketing Companies in 2000 - 2004  and 2004 - 2013 and again now in
 2013-2014


This idea  requires one to expand his own circle of competence so that he can continuously move from overvalued to undervalued sectors . This idea is  antithesis of BUY RIGHT AND SIT TIGHT" strategy 


HENCE THIS  IDEA  MAY NOT APPEAL TO WARREN BUFFET FANS , but has been advocated strongly by John Templeton