Tag Archives: Investing

Diversification – Interesting reads and my few cents


Just read two fantastic articles on diversification – companies diversifying into other businesses.
https://fundooprofessor.wordpress.com/2019/05/11/a-thread-on-diversification/
https://www.livemint.com/money/personal-finance/opinion-why-investors-should-stick-to-strong-sustainable-standalone-business-1557054729734.html

My few cents here…
What makes understanding a conglomerate difficult is that – there are not only multiple businesses – but multiple sectors involved
When multiple sectors get involved, then various moving parts come to play which makes it difficult to get hold on to the biz model
Each sector could be of different types – stable and predictable, cyclical, govt and policies dependent, forex fluctuation or crude dependent etc., etc.,

Then comes the management – each business’ management has to be analysed separately in light of the related sectors.
Then comes the valuation – SOTP valuation – each business has to be valued separately / DCFed, arrive at a number and compare with market cap.

But, I think unrelated diversification is the problem.
For ex, When a pharma company gets into real estate Or, an infrastructure company venturing into specialty chemicals business could possibly seen as a problem.

But, what about related diversification?

I don’t think that would be much of a problem
For ex, a paint company moving to varnishes, adhesives etc., a hospital business getting into medical devices or chain of medical stores business, a hotel business getting into online travel agency etc.,
Such companies can be comparatively easier to analyse and understand and value.

Amazon is one example who was into both unrelated and related business and successful in both
Related – Online selling of books and moved to selling anything online – core ecommerce biz model like, buy – store – sell (or) aggregator
Unrelated – AWS/Cloud, Devops tools, Primevideo, Tablets, Kindle, Alexa, Music etc.,

Even in investing, many great investors have suggested concentrated portfolio & within circle of competence. That is, diversify only within your circle of competence – the easier way to do this is to keep our circle of competence in related sectors and to diversify into those for investing.

Comments are welcome…

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Book Review: Masterclass with Super-Investors


Just finished reading – Masterclass with Super Investors by Vishal Mittal and Saurabh Basrar
A great piece of (hard) work by the authors with these investors, each of whom have a minimum of 25-30 years experience in the markets, so distilled around 300 years of investing experience in this book

First of all, hats off to the authors!

There are only a few books about Indian markets and investors and this one is defenitely a gem.

Very content rich – packed with experiences from India’s great investors – even though we have read and heard from these investors earlier in the media, this book is structured in Q&A style which gave more freedom to the authors to ask pointed and probing questions from retail investors’ perspective, which brings out the unknown information about these investors, in terms of their experience, knowledge and wisdom.

I think the following are the reasons that make this book an excellent work

  1. Even though this book talks about the earlier heard investing rules and dos and don’ts in investing, it gets these in the form of examples and experiences from these investors
  2. This book does not talk much about Financial number crunching and accounting related information – which we can get from everywhere
  3. Each investor explains about their major successes and failures in details with examples and numbers as a story – some of these sections are like as they say riveting read!
  4. They have also shared the knowledge they got from their peer / guru investors

It would be a little bit surprising for most of us to know these:

  • Some of them don’t do scuttlebutt analysis or meet managements at all
  • At times, they had a lot more conviction in the business’ future potential and opportunity than the respective managements
  • Most of these investors are against Leverage / Short selling

These are the few key points that I take away from almost all of these investors:

  • The stock market is about looking ahead and not looking behind
  • Courage to take a plunge without hesitation
  • Sometimes you may be too early to get into the counter – then you need the patience to wait
  • When you have a great idea, you need to back up the truck and buy. It is so difficult to do.
  • Smart investors will average up – as the story plays out and price increases – buy more
  • Ride the entire upward move – sell once the fall starts
  • If you are sure about your analysis and bought the stock – you will not sell even after it becomes 100 bagger
  • Think about what the opportunity was and how much you did?
  • Measure yourself by how much you could have done and how much you did
  • Look for trends and connect them to businesses and stocks
  • See how small an opportunity is now, and how big it can grow
  • You can set in life with 2 hundred baggers. The question is how much money you put in.
  • Read – Read – Read – books / annual reports / business news – if possible debate with like minded people – no other credible source to get knowledge / generate ideas

In my opinion, this book is a must read for anyone interested in investing in the markets – not only Indian markets…

I will definitely read, a couple of more times… after all you can’t remember / capture everything in one read.

One suggestion to the authors – they have only scratched the surface – just 11 investors are profiled in this book
I consider this as Vol 1… expecting couple of more volumes as we still have a lot more of them to be profiled.

Last of all, hats off to the authors!

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My understanding of Investing Framework


The thought for writing this post came from a tweet by @shyamsek this morning followed by my reply.

I wanted to share my thoughts on my Investing Framework – as how I see it and practice it.

In my opinion,
Science part, can be cultivated, learned and developed by anyone who has interest/passion in learning
Art part, difficult to learn as a skill, but over years of continuously reading annual reports, call transcripts, books, from others, can be developed to a reasonable level.
But, there will always be a difference between one who naturally has this and one who learns this.
That difference will make a difference in the investment returns between them.

The art part plays a little more role than the science part because we have seen markets punishing great businesses and rewarding mediocre businesses for an extended period of time.

During this time the art part comes handy to hold on to your conviction and continue to stick on to great businesses and even accumulate them.

As the science part can be developed as a skill, having that as a base, I think following categories of stock market investors emerge:

  1. One who has a perfect balance of both Science+Art are the ones who make out sized returns and become well known names of the investing world.
    Warren Buffett for one. Less than 1% of the investing world are here.
  2. One who knows the science part well and can handle the behavioral part, tend to make great returns over long time.
    They may stick to blue chip category of stocks. They dont sell early, or buy late.
    We know many who have bought Reliance, MRF, Dabur, Wipro etc., decades ago, and have passed on to next generation.
    Numbers / results dictate their decisions and they have patience and conviction to hold during ups and downs.
  3. One who knows the science and business and management aspects very well, but lacks the behavioral part, may churn portfolio frequently.
    They make good returns in the market, but, may miss opportunities to make enormous wealth.
    For ex., they may anchor to a price or valuation ratio and wait… Or, may sell winners and hold on to loosers
  4. One who only knows the science part – they may want to try and test their skills in the market
    May lose some / win some – only based on number crunching and some luck
    Will be better off with a couple of index/diversified mutual funds over long time

Please let me know your comments and feedback.

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All time highs and lows


Recently came across news where a stock price was referred to have hit an all time high.

So just thought of going through a list of stocks from recent bull run sectors (Finance and Consumer), and come up with their all time low and high and present price/market cap.

Some of the stocks have hit an all time low of less than a rupee and moved to as much as 4 digits – that is more than 1000 times and today they are very strong brands and still going great.

As you can see almost all of these are products and services we use on a daily/frequent basis in our day to day life.

That is as per Peter Lynch – Buy what you see !!!

Company Name All time low All time high Latest Price Latest Mkt Cap
Bajaj Auto 147.32 3,472.60 2,689.20 77,816.58
Hero Motocorp 18.00 4,200.00 3,238.00 64,666.57
Maruti Suzuki 156.10 10,000.00 9,364.00 282,867.77
HDFC Bank 6.45 2,219.05 2,078.45 564,286.40
Kotak Mahindra 0.64 1,424.00 1,287.55 245,481.78
ICICI Bank 3.82 365.65 340.65 219,182.55
Axis Bank 2.46 655.35 656.55 168,620.02
Kajaria Ceramic 1.41 787.55 491.15 7,806.84
Cera Sanitary 3.25 4,300.00 2,735.00 3,557.11
ITC 0.69 353.20 312.70 382,474.07
VST 49.70 3,774.00 3,161.00 4,881.19
Whirlpool 10.63 1,805.00 1,795.25 22,776.67
Symphony 0.13 2,212.75 1,118.85 7,827.14
TTK Prestige 5.75 8,911.20 6,914.75 7,987.34
Bajaj Electric 1.65 706.35 544.25 5,559.06
Hawkins Cooker 15.00 4,650.00 3,350.05 1,771.44
Havells India 0.16 723.00 714.60 44,696.29
V-Guard Ind 2.61 254.90 221.95 9,451.02
HDFC 6.80 2,051.00 1,950.15 329,806.26
Indiabulls Hsg 166.00 1,439.40 1,278.10 54,535.97
LIC Housing Fin 4.60 794.10 520.50 26,267.71
GRUH Finance 0.16 381.95 341.00 24,969.09
Dewan Housing 1.58 685.00 664.85 20,853.61
Repco Home 158.05 923.00 552.10 3,454.01
Bajaj Finserv 87.06 7,200.00 6,974.00 110,980.82
Bajaj Finance 1.95 2,959.70 2,984.05 172,468.66
Nestle 59.33 11,590.00 11,325.00 109,190.80
Britannia 14.00 6,944.10 6,737.00 80,951.22
GlaxoSmith Con 93.75 7,695.00 7,429.75 31,246.21
Bata India 11.86 1,087.60 1,095.95 14,085.98
Relaxo Footwear 1.14 874.00 849.75 10,227.05
Titan Company 1.17 1,006.00 882.05 78,307.18
Jubilant Food 80.80 1,555.00 1,550.60 20,463.12
Asian Paints 2.73 1,488.60 1,392.00 133,520.33
Berger Paints 0.41 341.45 342.75 33,282.23
HUL 9.33 1,807.75 1,769.00 382,709.18
Godrej Consumer 4.94 1,450.75 1,435.65 98,121.00
Dabur India 3.00 490.70 479.50 84,392.00
Marico 2.10 388.00 375.15 47,665.00
Colgate 39.06 1,285.00 1,152.30 31,284.00
P and G 151.11 11,000.00 9,744.30 31,119.00
Emami 2.34 714.00 565.55 25,464.00
Gillette India 40.00 7,196.90 6,491.05 21,057.00
Page Industries 241.25 36,335.95 35,430.65 40,033.00

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One Investment website that amazes me daily – The Safal Niveshak Post


Hi Readers,

I’ve subscribed to this free daily e-letter called The Safal Niveshak Post, which contains simple ideas on investing in stock markets and how investors must behave while dealing with their money.

I’m finding it quite useful and thought you might be interested as well.

You can sign up for The Safal Niveshak Post here: http://eepurl.com/cYgak

Or if you want to first read about the e-letter before signing up, visit this page: http://www.safalniveshak.com/the-safal-niveshak-post-free-sign-up/

The aspects I love the most about this website are the following:

1. Posts on Warren Buffet and his investing style and wisdom from his Letters to shareholders.

2. Posts on Charlie Munger and his valuable resources.

3. Articles on mental models

4. Wealth of information through great posts and articles grouped by world’s great investing minds

5. This website has 20 lessons for a smart investor, which is a free course and a must for anyone aspiring to have a control of their personal finances and investing

6. It also conducts various workshops and mastermind courses.

7. Many many more…

Regards,
Balaji Ganesan

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Interesting Reads 7 Aug 2013 – Howard Marks on investing, Questions to ask before investing, and Buybacks


1. Howard Marks as we all know a great investor and writer. His talk in the Equity Income Summit 2013 on what are the key questions that investors need to answer – http://bit.ly/1517voZ

2. Phil DeMuth, a Forbes columist talks about the one key question everyone should ask before investing – The question is ‘Do you have the edge over others’. What matters is knowing clearly whether you have the edge or not and admitting it. Never think you have an edge, which you do not, and go wrong – http://onforb.es/13fisEm

3. An excellent article by Equity Master on buybacks. This talks about what is a buyback, to understand the motive behind the buyback, what should investors look for and analyse and should they surrender their shares or not and what metrics to look for. Recently in Indian markets we see a pipeline of buybacks in the past few years, few of them were rewarding for investors like HUL, and some are not – http://bit.ly/17uG9cY

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Recommended Reading List


Thought I would share the list of recommended books, the best ones on each category.
I have read some of these myself and have experienced the rich knowledge in these, but, most of them are still on my ‘to read’ list.
Please share your thoughts and the books that you think I might have missed out.

Personal Finance

  • Winning the Wealth Game – Sanjiv Mehta
  • Rich Dad Poor Dad – Robert Kiyosaki
  • Cashflow Quadrant – Robert Kiyosaki
  • The Richest Man In Babylon – George S. Clason
  • Asset Allocation: Balancing Financial Risk – Roger C Gibson
  • The Intelligent Asset Allocator: How to Build Your Portfolio to Maximize Returns and Minimize Risk – William J. Bernstein
  • The Millionaire Next Door: The Surprising Secrets of America’s Wealthy – Thomas J. Stanley and William D. Danko
  • I will teach you to be rich – Ramit Sethi
  • The Total Money Makeover: A Proven Plan for Financial Fitness – Dave Ramsey
  • Secrets of the Millionaire Mind: Mastering the Inner Game of Wealth – T. Harv Eker
  • Think and Grow Rich – Napoleon Hill
  • The Forbes/CFA Institute Investment Course: Timeless Principles for Building Wealth – Vahan Janjigian, Stephen M. Horan, Charles Trzcinka

Economics

  • Basic Economics: A Common Sense Guide to the Economy – Thomas Sowell
  • Economics in One Lesson – Henry Hazlitt
  • Principles of economics – N. Gregory Mankiw
  • Principles of Macroeconomics – Joseph E. Stiglitz
  • Principles of Microeconomics – Joseph E. Stiglitz
  • The Economics of Inflation – Constantino Bresciani Turroni
  • Kautilya’s Arthashastra: The Way Of Financial Management And Economic Governance – Kautilya, R. Shamasastry (Translator)
  • The Box – How the Shipping Container Made the World Smaller and the World Economy Bigger  – Marc Levinson
  • How an Economy Grows and Why It Crashes – Peter D. Schiff and Andrew J. Schiff
  • Saving Capitalism from the Capitalists: Unleashing the Power of Financial Markets to Create Wealth and Spread Opportunity – Raghuram G. Rajan
  • Fault Lines: How Hidden Fractures Still Threaten the World Economy – Raghuram G. Rajan
  • Breakout Nations: In Search of The Next Economic Miracles – Ruchir Sharma
  • Spot the Next Economic Bubble – Saurabh Thirani
  • Freakonomics: A Rogue Economist Explores the Hidden Side of Everything – Steven D. Levitt and Stephen J. Dubner
  • The Logic of Life: The Rational Economics of an Irrational World – Tim Harford
  • The Undercover Economist – Tim Harford
  • 23 Things They Don’t Tell You about Capitalism – Ha-Joon Chang
  • 50 Economics Ideas You Really Need To Know – Edmond Conway

Finance & Valuations

  • The Interpretation of Financial Statements: The Classic 1937 Edition – Benjamin Graham
  • Investment Valuation: Tools and Techniques for Determining the Value of Any Asset – Aswath Damodaran
  • Damodaran on Valuation – Aswath Damodaran
  • The Little Book of Valuation: How to Value a Company, Pick a Stock and Profit – Aswath Damodaran
  • How To Read A Balance Sheet – Ram Kumar Kakani
  • How To Read A Cash Flow Statement – Ram Kumar Kakani
  • How To Read A Profit And Loss Statement – Ram Kumar Kakani
  • Financial Shenanigans: How to Detect Accounting Gimmicks & Fraud in Financial Reports – Howard Schilit and Jeremy Perler

Economic History

  • Wealth of Nations – Adam Smith
  • Das Kapital – Karl Marx
  • Lords of Finance – Liaquat Ahamed
  • The Ascent of Money – Niall Ferguson
  • The Worldly Philosophers – Robert L. Heilbroner
  • The Great Crash 1929 – John Kenneth Galbraith
  • A short history of Financial Euphoria – John Kenneth Galbraith
  • Manias, Panics, and Crashes: A History of Financial Crises – Charles P. Kindleberger, Robert Z. Aliber
  • Tulipomania: The Story of the World’s Most Coveted Flower & the Extraordinary Passions It Aroused – Mike Dash
  • The Secret History of the South Sea Bubble: The World’s First Great Financial Scandal – Malcolm Balen
  • 100 minds that made the market – Ken Fisher
  • Conspiracy of Fools: A True Story – Kurt Eichenwald

Investing

  • Intelligent Stock market Investing – Dr.Yasaswy
  • The Little Book of Common Sense Investing: The Only Way to Guarantee Your Fair Share of Stock Market Returns – John C. Bogle
  • The Little Book that Builds Wealth – Pat Dorsey
  • Learn to Earn – Peter Lynch
  • One up on Wall street – Peter Lynch
  • Beating the Street – Peter Lynch
  • The Intelligent Investor – Benjamin Graham
  • Security Analysis – Benjamin Graham and David Dodd
  • Margin of Safety – Seth Klarman
  • Benjamin Graham on Value Investing – Janet Lowe
  • The Warren Buffett Way – Robert G Hagstrom
  • The Warren Buffett Portfolio – Robert G Hagstrom
  • Buffett – The making of an American Capitalist – Roger Lowenstein
  • How to pick stocks like Warren Buffett – Timothy Vick
  • The New Buffettology – Mary Buffett & David Clark
  • The Tao of Warren Buffett – Mary Buffett & David Clark
  • The Essays of Warren Buffett – Lawrence A. Cunningham
  • The Real Warren Buffett – James O Loughlin
  • Warren Buffett and the Interpretation of Financial Statements – Mary Buffett and David Clark
  • Of permanent value : The story of Warren Buffett – Andrew Kilpatrick
  • The Snowball: Warren Buffett and the Business of Life – Alice Schroeder
  • Common Stocks and Uncommon Profits – Phillip A Fisher
  • The Little Book that Still Beats the Market – Joel Greenblatt
  • Dhandho Investor – Mohnish Pabrai
  • Mosaic: Perspectives On Investing – Mohnish Pabrai
  • Poor Charlie’s Almanack – Charlie Munger, compiled by Peter D. Kaufman
  • Damn Right – Behind the scenes with Berkshire Hathaway Billionaire Charlie Munger – Janet Lowe
  • Investing the Templeton Way – Lauren C. Templeton, Scott Phillips
  • Common Sense on Mutual Funds – John C Bogle
  • Bogle on Mutual Funds – John C Bogle
  • Quality of Earnings – Thornton L. O’glove
  • Moats: The Competitive Advantages of Buffett and Munger Businesses – Bud Labitan
  • Valuations – 30 Intrinsic Value Estimations in the Style of Warren Buffett and Charlie Munger – Bud Labitan
  • Supermoney – George J. W. Goodman
  • F Wall Street: Joe Ponzio’s No-Nonsense Approach to Value Investing for the Rest of Us – Joel Ponzio
  • Value Investing And Behavioral Finance: Insights Into Indian Stock Market Realities – Parag Parikh
  • The Little Book of Behavioral Investing: How Not to Be Your Own Worst Enemy – James Montier
  • The Greatest Trade Ever: The Behind-The-Scenes Story of How John Paulson Defied Wall Street and Made Financial History – Gregory Zuckerman
  • Reminiscences of a Stock Operator – Edwin Lefèvre
  • Market Sense and Nonsense: How the Markets Really Work (and How They Don’t) – Jack D. Schwager

Business & Strategy

  • How to win friends and influence people – Dale Carnegie
  • Everything You Wanted to Know About Business & Economics – Rommel Rodrigues
  • The Goal – Eliyahu M Goldratt
  • Competitive Strategy – Michael E Porter
  • The Competitive advantages of Nations – Michael E Porter
  • Built to Last – Jim Collins
  • Good to Great – Jim Collins
  • How the mighty Fail – Jim Collins
  • The Art of War – Sun Tzu
  • Nuts! – Kevin Freiberg, Jackie Freiberg
  • Business Stripped Bare – Richard Branson
  • Steve Jobs: A Biography – Walter Issacson
  • In Search of Excellence: Lessons from America’s Best-Run Companies – Tom Peters, Robert H. Waterman
  • Who moved my Cheese – Dr. Spencer Johnson
  • Execution: The Discipline of Getting Things Done – Larry Bossidy and Ram Charan
  • The Essential Drucker – Peter F. Drucker
  • Moneyball – Michael Lewis
  • The Best Business Books Ever: The Most Influential Management Books You’ll Never Have Time to Read – Basic Books
  • Small Giants: Companies That Choose to Be Great Instead of Big – Bo Burlingham
  • The 21 Irrefutable Laws of Leadership – John C. Maxwell
  • Titan – The life of John D Rockefeller Sr. – Ron Chernow
  • Sam Walton: Made in America – Sam Walton with John Huey
  • The 7 Habits of Highly Effective People: Powerful Lessons in Personal Change – Stephen R. Covey
  • The New Digital Age: Reshaping the Future of People, Nations and Business – Eric Schmidt, Jared Cohen
  • The Best Business Books Ever: The 100 Most Influential Management Books You’ll Never Have Time to Read – Perseus Publishing
  • Lateral Thinking – Edward De Bono

 

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