Category: Investing wisdom

Is market screaming buy?

I recently shared my review of Symphony limited with subscribers, you can get a copy here

One of the things that stood out was how luck has played a huge part in my returns from this position. See below table

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2013-14 (Mar)
2017-18 (Mar)
Increase (X)
CAGR
Q1 FY19 Current
Revenues (INR cr)
503.41
852.39
1.7
11.1%
701
Net profits (INR cr)
105.72
192.55
1.8
12.7%
130
PAT%
21%
23%
19%
Market Cap  (INR cr)
2800
13400
4.8
36.8%
6900 (Sep 2018)
PE
26
70
2.6
53

For the last 5 years, Sales and Profits grew at 11-12%, however, I got lucky as the … Read the rest

Management Intentions can’t be calculated in Excel

In the year 2018, I have been rubbed wrongly thrice now by controlling stakeholders (Management)

  • Fraudulent disclosures (ASX GSX)
  • Ungainful dilution (ASX LBT)
  • and now this one ..

this is my learning from investing in LEEL electricals.

I created this position at ~1100 crore, My initial thought process was company has sold its consumer division for an enterprise value of Rs. 1550 crores, on debt free cash free basis.

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The overall borrowings were ~1000 crores after paying off everything they would still have ~550 crores and a business left
I was paying 550 crores and getting a business with sales
… Read the rest

Don’t buy and forget

Warren Buffett is one of most misquoted [in terms of context] investment gurus of our times.

What happens when we are given below advise ?

“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”

or

“If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes”

We buy businesses and then hold them, thinking that Warren Buffet has recommended to hold our positions for long term. In fact one of most repeated quote I hear is

“I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.”

Trust me there are several businesses in India which if invested today and then magically the stocks markets shut down for 5 years, after 5 years you have to search the company and its promoters to get pennies back on the dollar invested.

Another chart that is thrown at me is this

Buffet quote -1

Warren Buffett is holding Coke and American Express for 20+ years.

 

Honestly tell me how many Coke’s like business are their out … Read the rest

Living in times of bull markets

We have just lived through the first leg of the bull market in India and as with all bull markets there is no dearth of fund managers, individual investors, sovereign funds, high net worth individuals etc. who have done exceedingly well for themselves and their investors.

This definitely is a reason to raise toast – As someone said “Make hay while Sun shine” and a single bull market allocated properly can change your life.

bull-1

and I for one definitely don’t belong to the school of thought which cribs on over valuation of securities as majority of who crib on valuations over companies leading bull market are the ones who don’t own the company. I have seldom seen people being unhappy when there holdings are hitting upper circuits every day 🙂

Cribbing takes away precious energy and is of no use, if you think a security is overvalued / momentum driven / operator rigged just move on there are 5000+ listed companies, I am sure there will be few with whom you will find peace.

But as Warren Buffet said stocks can’t outperform business indefinitely.

What could be more exhilarating than to participate in a bull market in which the rewards

… Read the rest

In Investing numbers are starting point

Years back, I was amazed at the claim made by Joel Greenblatt’s book The Little Book That Still Beats the Market

[Emphasis Mine]

Can you spare three hours to learn how to beat the market? As unlikely as it may seem, hedge fund manager and professor Joel Greenblatt, whose investment firm has averaged 40% annual returns for over twenty years, can teach you how. You can achieve investment returns that beat the pants off even the best investment professionals and the top academics. In fact, you can learn how it’s possible to more than double the annual returns of the stock market averages.

But there’s more. You can do it all by yourself. You can do it with low risk. You can do it without making any predictions, and you can do it by following, step by step, a time-tested, proven “magic formula” that uses only common sense and two simple concepts. Best of all, once you are convinced that it really works you can choose to do it for the rest of your life.

 

Obviously I bought the book, who doesn’t want to become a stock market genius in three hours, The book made everything easy to understand. … Read the rest

True Diversification

Why do we add a new security to our portfolio ?
To reduce risk and ensure not all our eggs are in same basket, the underlying thought process is if stock A doesn’t do well at least stock B will provide some returns and compensate for loss if any in stock A
This makes perfect sense if you go by what Harry M. Morkowitz said in 1950’s [emphasis mine]

The investments have different types of risk characteristics, some caused systematic and market related risks and the other called unsystematic or company related risks. Markowitz diversification involves a proper number of securities, not too few or not too many which have no correlation or negative correlation. The proper choice of companies, securities, or assets whose return are not correlated and whose risks are mutually offsetting to reduce the overall risk

It explains why investors invest in diverse spectrum of industries whose fortunes are not tied to each other
However many investors feel discomfort in adding a new company from a similar industry, At least I do. My thinking process is I already own TCS what the use of adding another IT company in the portfolio ? After all the company related … Read the rest

Periodically review your portfolio

Assessing and reviewing your portfolio is critical to be on top of your positions, While till today I have not found any structured way to go about it, What has helped me to think objectively is to focus on

  • status of key variable of business
  • risks identified
  • buying hypothesis – does it still hold good

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The next question is how often do you review ? 6 months, 12 months , 2 years ? Frankly there is no right answer – But I found 6-8 months is a good period to start with

Below is my simplistic review of two businesses in model portfolio – If would be foolish to buy … Read the rest

Download an ebook on Warren buffett partnership letters

Jim Rohn famously said,

You are the average of the five people you spend the most time with

As a young investor starting out it would serve you well if you can spent time with Warren Buffet (vicariously) by reading his fantastic letters

At Tankrich – We have taken an initiative to share his learnings through our video channel

This week having finished the partnership letters I thought it would be good if I could document those learnings in a single place

After few weeks of editing here is the final copy for you on Learnings from Warren buffett partnership letters

Below is Table of content of this ebook

Download a copy by sharing any of the above social links (I do this so that this reaches maximum people through your social networks)

If you are reading this in your inbox go to this link to download a copy

Building blocks

  1. What should be focus of long term investor
  2. Surest means of profit is value investing
  3. Think long term to evaluate performance
  4. Beating index is very tough
  5. True conservatism
  6. Magic of Compounding
  7. Price is everything aka Margin of Safety
  8. Cigar butt as a group works out to be a good

… Read the rest

Read more

Why you should not mix emotions and investing

I love the below quote related to emotion and investing

Emotions can be a great asset in life, but when it comes to investing, they may be a liability

Very important line and one needs tremendous patience and practice to avoid mixing emotions with acumen when making an investing decision

Let me tell you story of Anil, a retail investor,and how his emotions cost him dearly

Few years ago his friend told him about an established NBFC Bajaj Finance as a stock tip, he looked at the company’s ticker it was INR 88, he added stock to his watch list and waited for price to drop so that he can buy

Bajaj-1

 

 

 

 

 

 

 

 

A year went by and one day while browsing prices of his watch list he was stuck, Why ?

Bajaj-2

 

 

 

 

 

 

 

 

The stock suggested by his friend has moved almost 50% up, there was huge guilt in him on having missed 50% returns but then he consoles himself by saying ‘We can’t make money on every stock in markets’

He thought this would be end of his story with Bajaj finance, but almost a … Read the rest

Scuttlebutt

Don’t apply scuttlebutt like this

My mistakes have been one of most important sources of my learning, See some stuff  here

Today let me give you another example from my personal experience for you

In year 2010, I learned about this technique and in a minute you will know where it came from

The scuttlebutt technique is inquiring and asking questions to various people with mutual interest or are involved with a certain company or industry. Asking suppliers, vendors, customers, competition, trade association executives, research scientist from universities or in government and previous employees may all be intangible sources of qualitative information.

Phillip Fisher had first coined the “scuttlebutt” technique when he wrote Common Stocks and Uncommon Profits

Now eager to use this technique, I went ahead and started applying this on HDFC bank,

Context

Our family business had recently started dealing with a new branch of the bank and our industry is famous for squeezing the last dime out of bank in terms of service. I thought it was a perfect opportunity for me to find about culture of the bank and how it operates through its employee and fellow customers. What unfolded over next few months really surprised me; I was a … Read the rest