Financial Astrology : Jupiter – The Planet of Fortune

I will share not only what I learned from the financial market, but other aspects of human life also. Today, I am sharing something about financial astrology. I have seen that people are always blaming their luck and complaining about money. Let’s understand what astrology says.

1. Jupiter is considered a planet of luck and it is the provider of wealth and wisdom.
2. When a person blames his luck then he is also blaming his Jupiter.
3. I've noticed that "Bad Luck" or “How unlucky I am” is a very common word on every other person's tongue.
4. When anything happens that they don’t like, they are ready to say quickly “It's my bad luck”.
5. They do not know that blaming their luck starts the vicious cycle of their misfortune. 
6. When you blame your luck, you are also blaming your Jupiter which is the lord of direction, wealth and wisdom. 
7.  When you blame your luck, wisdom will disappear from your life.
8. When you blame your luck, wealth will disappear. I have seen that one who always blames his luck suddenly loses his gold ornaments and money. 
9. Blaming one's luck will destroy the quality of expansion and make a person narrow-minded. 
10. So, you should never blame your luck. It is your Jupiter that provides you direction, wealth and wisdom. 
11. The full article is available in my forthcoming book – “Jupiter: The Planet of Fortune.”   

A Sudden Cut in Dividend

 (Extract From My Book "Psychology And Investment")

In case of any negative indications about the prospects of the company, the first possible action of management is to save all cash outflows of the company. Therefore, a sudden cut in dividends is a clear indication that the company may face a cash crunch or other challenges soon. A company may skip paying dividends if it plans to reinvest or cover costs.

Hence, an investor should keep a close watch on all developments and it is good to avoid such stocks for the time being. This type of action indicates that an investor needs to examine the financial position of the company further and they cannot take such type of information lightly.

When an established company that is paying dividends at regular intervals suddenly increases it, decreases it, or defaults in paying dividends, an investor should examine all the scenarios.

For example, suppose a company is declaring dividends every year and this trend is increasing. The financial health of the company is good and the stock is also performing well. Let us assume that the dividend trend of this company for the last few years is 40%, 60%, 75%, 90%, 100%, 120%, 140%; But the next year suddenly the company takes a deep cut and it declared a dividend of 40%. This indicates that the company is trying to save existing funds for any uncertainties that may arise shortly.

It's also not a very healthy sign if a company suddenly increases its dividend. Because then it will be difficult for them to maintain the same performance. In the example above, let's say that instead of a deep cut next year, the company announced a huge jump in a dividend payment of 1000%. Such kind of hefty payment cannot continue in the years to come. In such cases, the situation of dividend payment is not smooth and declaration of dividend is not normal. This unusual action demands further scrutiny of such kind of announcement. 

Because dividends provide a signal of a company's financial health, most companies are hesitant to reduce the amount already declared in the previous year. Even after facing problems from many fronts, the company does not want to give any negative signals in the market, hence, they continue with their stable dividend policy.

However, every reduction in dividend does not give a negative signal about the company, neither increase provides a positive signal. There are times when a company continues to pay a stable dividend and is not able to increase even for years.

Reserves and Surplus

Extract From My Book “Psychology And Investment” 

Take a look at reserves and surplus of the company on the balance sheet. If the reserves are strong and it is increasing every year then it provides a signal of strong health of the company. 

After declaring the dividend, the balance amount is transferred to reserves and added under retained earnings. Without the availability of adequate funds, a company cannot go for expansion and cannot achieve the desired growth. Therefore, a young and aggressive company is always interested in increasing reserves and it may be possible that they may not take interest in declaring a dividend. A growing company is always interested in increasing its reserves and this is a strong indication of a growth stock.

Retained earnings come from the net profit minus the total amount of dividends, which belong to the shareholders. Therefore, an increase in reserves is beneficial for the shareholders.

Compare the company's reserves to the size of its equity capital. This type of company is a strong candidate for a bonus if equity capital is low and reserves are increasing every year.

A company should declare its bonus when its business is growing and there is a genuine demand for its shares among the shareholders. Post bonus, the company's equity base increases, proportionally stock price decreases and it encourages retail participation.

When a company announces bonuses unnecessarily or just for financial gimmicks, the demand-supply mismatch of shares leads to a fall in prices, and if the company is not able to expand the business, the demand for shares will not increase, and prices will not go up due to excess supply of shares. Such a move would become a nightmare for the shareholders who bought the stock only because of the bonus announcement.

Learn the Barriers of Investment - “Personal Attachment”

Extract From My Book "Psychology And Investment"

Many people have a personal attachment to the organization they work for over the years. It takes years to build strong pillars and these people worked hard to make such pillars for the organization. Many times, the new recruits do not even know what sacrifices the old generation has made to make such a strong pillar in the organization. But the ageing generation has only one objective, they want to keep their money safe for retirement. Therefore, the personal attachment to the organization is less in the newcomers and more in the older people.

Sometimes, because of this belief, older people accumulate too much stock in the company they work for years, thinking that all these investments are for their retirement. They forget that due to such activity the overall weightage of their portfolio has become unbalanced. Because of their personal feeling, they take interest in investing a huge amount of money in only one stock but they forget to remember that money has no emotion.

Such action diminishes the benefits of diversification and increases the risk of placing all the eggs in only one basket. Personal attachment to any company is another barrier that prevents from making a proper decision.

In my book, “Psychology and Investment” I have explained in detail what are those barriers, attractions and resistances which I observed while dealing with different types of persons.

Analysis of Shareholding Pattern

Extract From My Book  "Psychology And Investment"

Now you have done enough research and selected the stock with the belief that it will outperform in the long run. But have you analyzed the people who still have the stock? The analysis of the shareholding pattern is very important along with other analyses. First, check the promoter's stake in the company for the last two years. A high promoter’s stake is considered positive while a low stake means that the promoter himself does not trust his company. Too much promoter’s stake is also not a good sign.

An increase in promoter's stake is positive as it reflects an increase in confidence, but always it is not positive. You need to know why the stake has increased. Promoter's stake may increase due to share buyback or any merger activity. Stake decline should also be studied in detail, such as the issue of fresh shares for ESOPs or offloading of shares to a strategic partner.

Now Check the FIIs stake in the company. High FIIs holdings are considered positive as they invest only when they have confidence in the company's prospects. However, a very high stake is not good because you do not know when and for whatever reason they will sell. Even all the fundamentals are positive if FIIs start selling for whatever reason, immediately the stock will take a nosedive and as an investor, you will feel panic and do not know exactly what is happening.

One thing is certain that if promoters are increasing their stake, they are bullish on their stock and also signifies that they have confidence in their company. Don't buy any shares blindly just because the stake of the promoters or FIIs have gone up. Gather as much information as possible about changes in shareholding patterns. It may be possible that fundamentals start changing on such types of stocks. But you should not rush to buy stocks immediately after having such information. On the other hand, immediately exit the shares where the promoters are selling their stake in the open market. I have seen that those stocks are highly vulnerable in the market if the promoter’s holding is less than 30% even the fundaments of the company are very strong.