A very warm welcome to Mr. Warren Buffett – my guru & the richest person in the world. Above all a living legendm, a great philnthropist & above all a great human being – on his maiden visit to India.
Today we touch on one of the most important concepts -which forms the cornerstone of Mr. Warren Buffett investment philosphy
Intrinsic Value
Very important concept. It is the Cornerstone of value investing.
Let us take the example of a House built. At any time it has an intrinsic value comprising of cost of land, material used, labor etc.. All these add up to form its Intrinsic Value.
Similarly for a business- its assets- plants, brand value, distributor network, customer loyalty, cash balance etc. add to make up the intrinsic value of a business- what exactly is the business worth?
To buy the shares of a business when they are selling for less than their Intrinsic Value is very important & is the right thing to do. When one is doing that one is investing. Otherwise one is speculating.
Tuesday, March 22, 2011
Tuesday, March 1, 2011
Bangkok diaries- Does the budget matter?
Bangkok diaries- Does the budget matter?
Hairat Mubark to all!!
Who remembers the pompous announcements made in last year budget? Who will remember the pompous announcements made in this year budget. No one. As a true congressman P.M.( Pranab M. & not the P.M.) knows that India progresses by the Grace of God & the hardwork of its citizens. So they just do nothing. That is what exactly he has done in this budget. Nothing.
Everybody knows that India was a economic superpower when native Americans roamed around U.S.A.. I was recently traveling around Thailand & the whole country ( not only cities like Bangkok, Pattay, Phuket but even plaves like Krabi is prosperous. By the way 1 baht =Rs1.6 & last time I traveled to Thailand it was 1 baht= Rs1.3). They don’t know what an ELECTRICITY CUT means. Roads are excellent. Shops -7 eleven are open 24 hours selling everything from liquor to candy. But now leave aside the developed world, we are decades behind even Thailand!
Why? One big reason is the attitude of the govt.. Outside India, govt. & its agencies exist to facilitate life of people. But in India the omnipotent sarkar is all the time working overtime to make life difficult for its citizens. Lrt us hope that this changes in future.
Hairat Mubark to all!!
Who remembers the pompous announcements made in last year budget? Who will remember the pompous announcements made in this year budget. No one. As a true congressman P.M.( Pranab M. & not the P.M.) knows that India progresses by the Grace of God & the hardwork of its citizens. So they just do nothing. That is what exactly he has done in this budget. Nothing.
Everybody knows that India was a economic superpower when native Americans roamed around U.S.A.. I was recently traveling around Thailand & the whole country ( not only cities like Bangkok, Pattay, Phuket but even plaves like Krabi is prosperous. By the way 1 baht =Rs1.6 & last time I traveled to Thailand it was 1 baht= Rs1.3). They don’t know what an ELECTRICITY CUT means. Roads are excellent. Shops -7 eleven are open 24 hours selling everything from liquor to candy. But now leave aside the developed world, we are decades behind even Thailand!
Why? One big reason is the attitude of the govt.. Outside India, govt. & its agencies exist to facilitate life of people. But in India the omnipotent sarkar is all the time working overtime to make life difficult for its citizens. Lrt us hope that this changes in future.
Sunday, January 9, 2011
Demand & supply
Demand & supply
This one of the most simple sounding concepts in Economics but it is a very important concept. As has been positively written about India and other BRIC countries, the increasing population and increasing wealth and size of middle class in India and other BRIC countries is leading to ever increasing demand for all sorts of products and services like cars, two wheelers, consumer durables, mobile telephony etc.. This means an ideal scenario of increasing sales and profits for most of the companies in India.
The most important words in economics which explain the irrational rise in price of assets, commodities etc. – the rise in price of crude oil from $10/ barrel in 2000 to $147 / barrel in 2008 – is partly due to increased demand. Even the irrational increase in equity prices in bull market is a case of demand being much more than the supply of shares - the buyers outnumber the sellers -a classic sellers market and hence weeds get sold as flowers 2006-2007. And in the bear market, it is the vice versa- the sellers outnumber the buyers and hence the supply of shares is much more than the demand. The result -dramatic fall in prices. A classic buyers market- and hence flowers are being sold at the prices of weeds as in 2008.
This one of the most simple sounding concepts in Economics but it is a very important concept. As has been positively written about India and other BRIC countries, the increasing population and increasing wealth and size of middle class in India and other BRIC countries is leading to ever increasing demand for all sorts of products and services like cars, two wheelers, consumer durables, mobile telephony etc.. This means an ideal scenario of increasing sales and profits for most of the companies in India.
The most important words in economics which explain the irrational rise in price of assets, commodities etc. – the rise in price of crude oil from $10/ barrel in 2000 to $147 / barrel in 2008 – is partly due to increased demand. Even the irrational increase in equity prices in bull market is a case of demand being much more than the supply of shares - the buyers outnumber the sellers -a classic sellers market and hence weeds get sold as flowers 2006-2007. And in the bear market, it is the vice versa- the sellers outnumber the buyers and hence the supply of shares is much more than the demand. The result -dramatic fall in prices. A classic buyers market- and hence flowers are being sold at the prices of weeds as in 2008.
Tuesday, October 5, 2010
The time for steady selling has arrived in Indian equity markets.
If you want to see a hit movie in a theatre, naturally there will be a huge crowd of people interested in watching this movie. But then you are given a chance to enter the theatre to watch the movie by entering either when there is a huge crowd at the exit as all the people are leaving the theatre or when there is a huge crowd at the entrance as all the people try to enter the theatre- which one will you choose? Common sense would dictate that one choose the former- enter the theatre when there is a stampede at the exit and leave the theatre when there is a crowd jostling & pushing each other to enter the theatre. Similarly in stock markets, one should buy in a bear market ( read when all the people are rushing through the exit of the theatre- selling their shares at ridiculously low prices ) & sell in bull markets ( read when all the people are& pushing each other to enter the theatre – buying shares at ever increasing very high prices).
Similarly, investors should start selling small percentage of their equity investments as the bull market is well & truly on in India. And as in the analogy above, the hit movie is the Indian economy’s steady growth & the crowd of FII’s rushing in to invest in Indian cos. is the crowd of people at the entrance of the theatre. If caution is not exercised by the rational investors then as might happen in a stampede, they might get financially hurt or worse be finacially crushed!
Similarly, investors should start selling small percentage of their equity investments as the bull market is well & truly on in India. And as in the analogy above, the hit movie is the Indian economy’s steady growth & the crowd of FII’s rushing in to invest in Indian cos. is the crowd of people at the entrance of the theatre. If caution is not exercised by the rational investors then as might happen in a stampede, they might get financially hurt or worse be finacially crushed!
Thursday, September 23, 2010
Herd mentality!
The feelings of the crowd rather than being sum total of their feelings, nobody would subscribe to individually – as a bull / bear market develops, a lot of people are active part of it. And their feelings – bullish & extra risk taking in a bull market ; vice versa in a bear market- are so because they are part of a crowd & if they were not part of this crowd, then it is possible that their feelings would have been completely different. It is the herd mentality that makes people in a crowd have feelings that they might not have if they are not part of the crowd. In 1990’s the idea of all changing impact of I.T. leading to the dot. Com bubble etc..
Saturday, September 4, 2010
If bear market is the best time to buy stocks/ other assets, then why don’t people buy during bear markets ?
In A Bear Market Its Easier For A Person To Admit That He Has Committed A Murder Or Has Stolen Something Than To Agree That He Owns Shares of a co.. Why so? Because the shares prices have been falling at a very fast pace for many months at a stretch, the gullible common investors who had bought foolishly at or near the top level of the indices –Sensex at 21300 in Dec2007,& at 6200 in Dec1999-have lost huge sums of money as it is common for the indices to fall 60% from their top- Sensex falls to 9000by Feb2009 & to 2900in Jan 2003. There is huge amount of negative publicity regarding owning shares. Yours truly also, when I started with speculation in 1999, lost all my meager savings. It was then that I decided that I will make huge sum of money . I looked for the people who hagd been the best in making money from equity markets. This led me to Warren Buffett, later Peter Lynch, Philip Fisher . By following the investment philosophy of these living legends, since 2000 my fund has been generating 30% compounded return p.a.. What that means is that Rs. 1 lakh invested under guidance of Vitastaa Investments & C. in year 2000 is worth about Rs. 10.6 lakhs by year end 2009.
p.s. I am wriring this blog after some time as the months of April, May,July, August, October, November January & February are the busiest for me as I have to update the financial performance of about 2000 cos. I keep track of.
p.s. I am wriring this blog after some time as the months of April, May,July, August, October, November January & February are the busiest for me as I have to update the financial performance of about 2000 cos. I keep track of.
Monday, July 5, 2010
Vision & its importance in invsting for a fortune!
Try to develop the vision to see where the sales & profits of the co. will be in future. I made huge sum of money by buying Hindustan Zinc at Rs. 14 / share in 2003 and the scrip went to a high of Rs, 1000 in 2007. You will see this happening again & again in the equity markets. In 2003, the N.D.A. govt. disinvested in . Sterlite ind. Bought the stake at Rs42/ share. The market price of was Rs.14-18 range. Every one could see that the shares of Hindustan Zinc were selling at a huge discount to the price at which a substantial stake of the co. was sold. I too saw that. And I bought about 5000 share at the price of Rs14. What also helped me in making this decision was that I had worked in Udaipur, Rajasthan. I had visited the plant of Hindustan Zinc . I had seen their mines. This helped in my buying the shares of Hindustan Zinc. That the global zinc prices were at a low was the added kicker. If the prices have been low for sometime of a commodity, then it usually means that the prices have hit a bottom & are headed northwards in future . Why other so called analysts, investors were not buying at this stage? The global economy was just recovering from the bursting of the i.t. bubble. There was fear all around. But an investor who did his home work of fundamental analysis on Hindustan Zinc, should have bought the shares of this co.. This is where the quality of an investor- firmness of character comes in. One has to have faith & conviction on one's investment decisions even though at that time nobody seems to see things that way or worse laugh at or ridicule your investment decisions.
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