Beware of glossy stock predictions

Here it one such glossy stock prediction coming from a guy who has cult following on internet and whose recommendation have hit upper circuits after mentions on his blog

Company

AG-1

Now let us dissect the recommendation

Ag-2

Generic statements, a promise that Mr.Modi’s new government can be a game changer for sector, good to know that the market opportunity / scale is huge

Ag-3

There could be valid reasons why Asian Granito has always traded below par to above companies but this not explored. Well the real reason is Asian Granito has been reporting consistent decline in earnings compared to above companies which have been doing fantastically well, but that doesn’t fit into story so the author chooses to ignore this, Have a look at profits in below chart

ag-4ag-5

Trading at less than 10 PE , not able to find reason ???  the reason is very simple even if someone had bothered to look at even basic figure of net profits for Kajaria and compared that with Asian, Here it is for your reference

ag-6

Turnover has increased for both companies, however one look at net profit and you will know why share price of Kajaria has flourished and Asian Granito has declined… Read the rest

Finding Stocks with Earnings Power for Long-Term Profits

One size doesn’t fit all is often said for investments. However Hewitt Heiserman has written a remarkable book that gives you a blueprint for finding great growth stocks for the next decade without taking on a lot of risk in the process. His method can be applied to all types of companies.

According to the book there are three key factors which drive long term profits for a successful investment

a. Competitive advantages enjoyed by the firm or what Warren Buffet calls Moats that keep rivals at bay. The book doesn’t provide any tool to determine competitive advantage however it provides a quick check-list to ascertain if a firm is enjoying competitive advantage. You can read our recently posted article on understanding competitive advantage to gain more insights

b. Valuations – Great companies can become lousy investments if brought at wrong price, the book again has little on valuation front. Use our stock price calculator to get first-hand view of value of stock

c. Earnings power – Whether a company possesses authentic earnings power for long-term growth, The 2 earnings power ratios you need to calculate before making your next investment. The Enterprising EPS and Defensive EPS.

The first is … Read the rest

Weekly Digest

A review of The Dhandho Investor

Weekly Digest – The Dhandho Investor, this week focuses first on an investment book – The Dhandho Investor: The Low-Risk Value Method to High Returns by Mohnish Pabrai . This book by Mohnish Pabrai describes the concept of value investing in the simplest terms. Even a person new to investing could get a good idea of how value investing really works. He also shows how he reverse engineered Buffett’s investing mechanism and used it in his investment style.Mr. Pabrai’s idea generation- reworking of older philosophies into a newer framework and language is very thoughtful.

Watch this interactive video with Author , the main concepts from book are shared in video as well

Buy book here
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Students of … Read the rest

Weekly Digest

Improving work productivity

Weekly Digest – Improving work productivity

First up hope you have read

The most read article on Tankrich ever –  understanding competitive advantages

Also read this case study on bad economics Vs Good management

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In today’s weekly digest first up Jessica Stillman teaches us ” How to Get All Your Work Done in Half the Time”  Here are few simple tricks shared

1. Use Pomodoro technique – work in 25-minute sprints of single-minded focus to get maximum productivity

2.  Choose tasks wisely – To enable emotional satisfaction

3.  Forget 9 to 5 –  Focus on managing your energy not time

So get your work schedule corrected from long 60 hours+ week to more manageable 40+ and enjoy life. Read the complete article here

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Avoid investing in business with poor economics

MNG - 0

  Economics matter – Manugraph

  India

 

 

 

“When a management team with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.” – Warren buffet

A company with clean and transparent management running a business with bad economics is a bad investment choice. In today’s post we will try to explain this with example of Manugraph India

About Company

Established in the year 1972 by its founder Mr. S. M. Shah, Manugraph India Ltd is India’s largest manufacturer of web offset presses. In India, Manugraph ranks as Numero Uno in the manufacture of web offset presses. With a whopping 70% market share and quality presses ranging in speeds from 35,000 – 70,000 copies per hour, Manugraph presses are present in nearly all major publication houses. For more details visit their website here

Our Method – Inferring management communication to share holders via annual reports

Here goes our analysis of annual reports and persistent economic problems articlated by management

– Inability to pass rise in cost to customers

– Inability to control wage / employee benefit cost

36th Annual report (2007-08)

Read the  Management discussion and Analysis … Read the rest

Symphony – Understanding Competitive advantages

Previously I have written about how to identify stock investments

Like Peter Lynch here

Using Pause and Play here

By following smart money here

One of the pointers in Ten point investment map is to identify whether company has sustainable competitive advantages. Many of the investors have this question on how to define/find competitive advantage of company. We will try to ascertain competitive strength of  Symphony Ltd one of our top picks in Model Portfolio.  I am borrowing heavily from Warren Buffet’s letters to his shareholders.

1.  Will Company be in business for next 10 years ? Is there a big market to address – Symphony limited makes air coolers, also known as evaporative cooler, swamp cooler, desert cooler and wet air cooler, works on the evaporation technique; it uses the hot air in the room and water to generate cool air.  This is what I picked from there 2012-13 Annual report

In India,about 132 million households live in hot dry climatic regions (about 54% of the total) and about 11 million households live in moderate climatic regions. This represents an aggregate 143 million households (58% of total) of potential customers.

So we can safely assume that there is a … Read the rest

Weekly Digest

Read, Note and Learn

This weekly digest – Read, Note, Learn

Let us start with a blog which is full of wisdom tenets. I accidentally landed up on this blog and I am already a fan. Seeking Wisdom is an attempt by Jana V to master the best of what other people have already figured out. You will find lucid writings on analysis of Indian companies (the reason I landed up there) , Mathematics, Biology, Mental models also prominently feature as topics on this blog. My personal favorites were

Sell Winners – Hold Losers

How to lie with statistics

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Learn from masters

Weekly Digest – Learn from masters

This week first up we learn from renowned image consultant Lauren Solomon , a true master in image consultancy. This article in Forbes asks a question –   how much does a powerful professional image matter? The answer is Yes it does matter a lot the article then shares examples on how people have transformed their professional careers just by changing their professional image. Some tips that one can learn

Wear clothes that fit properly

Wear good shoe

Casual clothing can be stylish and smart

How you start the day is how you end the day

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Why V mart could be next Walmart

We recently added V mart to our model portfolio

The organized retail sector, which consists of only 5% of total retail market, is estimated to touch 15% by 2025. India has few organized players like Pantaloon Retail, Shoppers Stop, Vishal Retail, Koutons, Trent, Subhiksha, Reliance Retail, More, Spencer, V Mart

Now why V mart is different

1. V Mart is focusing only on Tier II & III  Cities, Currently they have 90+ stores in northern India.The company plans to add up atleast 25 stores for the coming few years. In these cities it pays average rent of just Rs 25 per square feet compare this to 150-200 which pantaloons is paying

2. The average sales per sq ft has increased from Rs.507 in 2011 to around 710rs now.The management is confident of increasing the same to even higher rates by meeting the aspirations of people by proving quality fashion at affordable prices.

3. 5 year sales growth 31.35% 5 Profit growth 37.61% are very impressive numbers

4.  Very impressive debt ratio of 0.25 leader in it’s industry

5. V-Mart is first organized store in most of the towns it enters, which gives it the first mover advantage.

 

Stay-on free … Read the rest

Forming habits to excel

Today in weekly digest  forming habits to excel

First up is Crisil’s first ‘State Of The Nation’ report, It is a comprehensive and extensive analysis of the Indian economy, individual sectors and companies. It helps investors to understand the macro situation about the country. The report has massive coverage of 2481 companies across 70 sectors. I especially liked the way they have conducted vulnerability analysis on companies on the below five factors

1 Demand pressures – Expected revenue growth

2 Liquidity and working capital challenges

3 Extent of indebtedness (total outside liabilities/ tangible net worth)

4 Ability to service debt (interest cover), and

5 Foreign currency volatility

Above is a macro framework which any investor can take away and use to analyze any specific company. Some of the results to take note

Education sector was highest number of companies(73%) which had were not vulnerable any of the above 5 factors followed closely by Healthcare (71%) and Chemicals (65%)

The worst hit sectors – no surprises were infrastructure and real-estate. Download full report to gain complete perspective

 

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“We are what we repeatedly do. Excellence, then, is not an act, but a habit.”
― William Durant

Excellence can be achieved … Read the rest