'Buy high, sell higher' not a good strategy for retail investors: Sandeep Shenoy

In a chat wth ET Now, Sandeep Shenoy of PINC Research shares his view on what a retail investor should look at before buying stocks.
ET Now: We will speak about Bosch and Eicher and all the consumer durable companies, white good companies such as Whirlpool. The Whirlpool stock is not a five-digit stock, but still it has inched up substantially. At Rs 2,200, Symphony is a five-digit stock, but has inched up substantially. Having said that, these companies are talking about the best growth periods for them coming up on the next three or four years. What is your view?

Sandeep Shenoy: One should differentiate between stock's momentum, growth and cash flows. A value investor will generally try to move into a cash flow zone. It may be costly, but if there is a rapidly increasing intrinsic cash flow, then it makes a case for people to invest in it. It is because you are not only investing in the imputed growth, or like the growth which is being converted by the stock price, but in the cash flows too.

Among these companies, you have a PE of 100 and you see a growth of around 15 per cent in your PAT, then there is a fundamental disconnect.

I am not going to say that the stock is going to crack, but yes you are playing, you are trading on thin a ice.

The trade may work in your favour, but that is not what a prudent investor does. There are people who have upheld or adhere to that logic of 'buy high and sell higher' and made decent amount of capital in the markets. But that is not what a common investor should do, it requires a separate set of skills which is not commonly available.