1st Jin of the stock market - Stocks you shouldn’t buy!

First type of stocks that investors in the stock market should stay away from!

Jun 5, 2023
If you are someone who likes to:
1. do your work/research once on a stock,
2. buy the stock and
3. keep adding that stock on regular intervals (like SIP) in your portfolio,
This one is for you!
This strategy can be awesome for real investors i.e. people that consider buying stocks as long-term investments, but they need to be sure about what they are buying!
So here are the 4 red flags that investors should keep an eye on before buying any stock.
We call them 4-Jins
Let's start!

4 types of Jins in the Pakistan Stock Exchange

1. The watchdog - smallest jin of all
2. Price caps - the fittest jin of all
3. Sakari company - the biggest of all but slow and easy to spot
4. The choor manager - very difficult to spot but worst of all
This is my way of saying 4 types of businesses that you should stay away from. You won't find all 4 in ONE company. At most 2.
But I would say even 1 is enough to crush a stock's performance vs other better stocks.

The Watchdog Jin

notion image
In a family of 4, it's the smallest and least meaningful. I call it toothless jin.
But don't ignore its importance. This jin's saya comes on sectors or companies when they are doing their best i.e. making the most amount of money.
This jins comes in many forms but usually in Pakistan, it works through the Competition Commission of Pakistan. But if a government would see any sector making money a lot of money, they will release this jin on that sector.
The bad part about this jin is that it is unpredictable. If you invested in a company, you will have no idea when or how this jin may latch on to your company. But the best part is, it's toothless.
CCP will fine your company but it has no means of getting that fine out. 99% of the time courts will turn down the fine and your company will keep on earning as it was.


From Lucky Cement Book FY22
From Lucky Cement Book FY22
CCP has fined the cement industry at least twice in the last 15 years, and the industry hasn't paid a dime.
But not paying the fine and stock market performance are usually two separate things.
When this happened for the first time. Stocks came down. But as CCP kept on fining without getting any money out, the market realized the power of this jin - toothless.

Sectors they prefer to put their hands on?

Usually, sectors that have a price discipline mechanism. In other words cartelization.
Be cautious of this jin in the following sector:
1. Cement Sector
2. Steel Sector
3. Pharma Sector

Should you change the method you buy any company from these sectors?

Just keep in mind that there is a Jin out there looking into these companies.
If CCP fines a sector for the first time on a company, its stock price will fall surely! But as they keep fining them while companies challenge them in court, nothing much will happen. For example, Cement stocks.
Next up: The fittest jin of all! The Price Cap Jin. This Jin has all the potential to ruin your investment!
This article is just the tip of the iceberg. A lot more understanding is required to choose the best investment for you.
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