Crocodiles have been living on Earth for over 85 million years. We humans, on the other hand, appeared only 0.3 million years ago. According to scientists, Crocodiles have been around since the time of Dinosaurs. Dinosaurs became extinct, but these badass reptiles continue to hang around to this day.
The fact that they have survived for so long demands investigation of these lethal creatures.
Crocodiles are cold-blooded animals – they do not regulate their body temperatures like us humans, which reduces the energy requirement greatly.
They can go on for months without eating anything and still survive. They have thick armored skin to protect against other predators as well as the harsh external surroundings. Their immune system is bullet-proof and very serious wounds or cuts are easily healed.
Crocs live for 30 to 40 years on an average but some can even live to 100 years or more.
But how does any of this help you in becoming a successful investor? Let’s be patient and find out!
How do Crocodiles hunt?
There are two types of predators – those who chase their prey(ex. Cheetah, Leopards, etc.) and those who do not. Crocodiles fall in the second category.
Crocodiles do not chase their prey. Instead, they identify the place where the prey is expected to come, and then they do nothing but wait patiently.
With only the eyes outside water and the whole body submerged and hidden from the world, they continue to wait.
Eventually, when the prey is close enough and the Croc is confident, he strikes the innocent animal with the speed of light, and within a few seconds, game over!
It is impossible to escape the grip of a crocodile once caught. They immediately pull the prey into water such that the poor animal dies as soon as possible by drowning.
The bone-crushing strength of these monsters can rip apart large animals such as Zebras in almost no time.
In some cases, the crocodile may perform what is known as the “death roll” to disorient the prey. In a death roll, the crocodile rolls around with great speed with the prey tightly grabbed between its teeth.
A fearsome sight to watch, the crocodile then swallows the animal.
Successful Investing using the Crocodile strategy
Patience can be your number one tool when it comes to investing in the stock markets. Obviously, if you are a day trader, this does not apply to you. But in long term investing for wealth creation, patience is the most essential ingredient.
Most of the time you will have to do just nothing but wait like a crocodile waits for the right opportunity and then acts swiftly at the correct moment.
Arguably the most influential and successful investor of our times, Warren Buffets puts it this way, “The Stock market is a device for transferring wealth from the impatient to the patient.”
The key to wealth creation from the stock markets is identifying great investment opporunities(great companies) and waiting for a time when these wonderful companies are available for less than their actual worth.
The stock markets are mostly efficient but they are not always efficient. There is a thin line to be drawn here.
Human emotions of greed and ecstasy sometimes create a bubble in the markets when almost every stock is expensive. This is usually the time for selling and not buying.
Sometimes there is panic, or blood on the street as they say. Everyone from the foreign institutional investors to the small individual person is selling just because everyone else is selling too.
These are the golden opportunities the alligators of investing had been waiting for patiently.
Investing is more about controlling your emotions than anything else.
Sweet are the uses of adversity which, like the toad, ugly and venomous, wears yet a precious jewel in his head.William Shakespeare
How the Stock market crash of March 2020 due to worldwide lockdown was a golden opportunity for the Alligator investors?
When the lockdowns were announced worldwide in March 2020, there was an eerie feeling among investors. The future seemed dark and too much uncertainty prevailed.
This was accompanied by huge selloffs in all stock markets worldwide. Stock prices crashed to multi-year lows and people were afraid.
This was a rare opportunity when hundreds of excellent businesses were available at a fraction of their intrinsic value or underlying business value.
The most successful and seasoned investors always look for opportunities such as these and make large bets at these rare occasions.
Mohnish Parbai is the author of a book on value investing called “The Dhandho Investor”. He insists on ‘making large, infrequent bets’.
Real wealth is created by betting hugely when the odds are heavily in your favor.
A concentrated portfolio of 8-10 stocks with each stock purchased at a price well below the business value can be the game-changer in your investing journey. I strongly suggest reading ‘The Dhandho Investor’ for a clear understanding of the principles of value investing.
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Become a Crocodile, not Chicken little!
Waiting for the right opportunity can be boring but the bitter truth about investing is – it is boring.
Sitting in one place for long periods of time is not fun for sure but the rewards compensate for your patience.
Don’t be like the chicken that cries, “Oh the sky is falling, the sky is falling”. We are living in one of the most stable times in history. It’s unlikely all the companies in the country will collapse all at once.
Humans have faced far harsher periods in history and still survived. The smart guys who read history made more money during the lockdown.
Crocodiles have been applying the strategy of patience for millions of years and have survived for more than 85 million years. Do you really think you can beat them?