How I made $ 2,000,000 in the Stock Market – by Nicolas Darvas.

If there is one engrossing book that all Value Investors should invariably read it is this one :

How I made $ 2,000,000 in the Stock Market – by Nicolas Darvas.

This extraordinary book tells us about the most unusual success stories in the history of stock markets. Nicholas was a zero and did not know head or tails about stocks but slowly and gradually he slogged it out and eventually understood much about the markets and emerged a hero through losses, trials, tribulations and self – introspection.

I am reproducing below some interesting extracts from this book and hope this will encourage you to read the book from start to finish.

Darvas strongly believed that there is no such thing as cannot in the markets. Any stock can do anything and can mock at the best and brightest of folks on Wall Street / Dalal Street. So, even if Rakeshji continues to hold Titan thinking it will cross Rs.5000/= the market teases him when the stocks tanks in 3 digits abruptly. Well, Rakeshji;s prophecy may or may not come out to be true. But today, the stock closed at Rs.3568.30, up by Rs.263.05. By the way, Titan’s Net Profit margins are less than 10 per cent. Maybe, it’s a Tata company with great growth ambitions but at PE of 47 I would simply give it a pass.

Darvas also strongly believed that the crowd is more often right than wrong. He cites the case of one play of George Bernard Shaw wherein after the curtain falls everyone cheered and clapped except one man who also saw his play. GBS went upto him and said : “ Don’t you like my play?” The man replied : “ No, I don’t. “ Shaw said :” Neither do I, but what can the two of us do against all the crowd ?”

Moral : In the markets, learn to accept everything for what it is – not what you want it to be. You want the stock you just bought to rise and rise but it falls and falls. What do you do. Accept the fact you lost and sell out or hold on if you have reasons to believe that the stock will rise again. Darvas was good at cutting his losses quickly and swiftly.

Darvas is also of the view that there is no such thing as good or bad stocks – there are only rising and falling stocks and that one should hold the rising ones and sell the falling ones. And in order to do this, you need to bring your emotions – hope, fear and greed under complete control.

Darvas also subscribes to the view that if one horse is going to win, it will win, even if thousands of onlookers are cheering for another one. It’s like saying that over the long run Cairn will give better and greater returns even if millions are cheering RIL!

Nicholas Darvas is also humble enough to reveal the following:

• I was bound to be wrong half the time.
• I must accept this fact and adjust my ego accordingly.
• I must become an impartial diagnostic who does not identify himself with every theory or stock.
• I cannot merely take chances. Firstly, I have to reduce my risks as far as humanly possible.

Well, in order to know how precisely Darvas made $ 2,000,000 from the markets, you need to read the book from start to finish. Trust me, you will enjoy reading it and you may perhaps become the next Indian Nicolas!

This is one book that will give you the moral courage and confidence of doing the right things instead of being swayed by the Sensex and senseless 24x7 market gossip and grapevine that can dim your decision making process and encourage you to buy stocks that will stick to your fingers like TAR! Instead, learn to master the art of investing all by your self and be a self made winner like Nicolas Darvas.

Kishor S. Khot, [Kishor@hbjcapital.com], Equity Strategist, HBJ Capital Services Pvt Ltd