found this classic lecture at this link ...enjoy !!
http://www.tilsonfunds.com/BuffettNotreDame.pdf
Saturday, July 23, 2005
Risk Reward ratio not in favor of investors at 7400 levels
Read this interview of chetan parikh (he runs the excellent website capitalideasonline ). He is an exceptional investor from the graham - buffett school of investing and among the few investors whose views i respect.
The complete interview is available in moneycontrol website
http://news.moneycontrol.com/backends/News/frontend/news_detail.php?autono=174200
some snippets below
He says, "I would be comfortable with the levels being below 6000, because if the market goes below the 5500-6000 levels, there would be a lot more trading opportunities. But at this point of time in the market, it is difficult to find stocks with a large margin of safety."
He adds that, a good band of trading for the market would be between 12-18 times earnings, and on that basis the Sensex should be anywhere between 5000-8400 levels.
Parikh says, "At the 7300 levels, the risk reward is not in favour of investors. This does not mean that the markets cannot go up, because on liquidity the markets can go even upto 8000 levels and past that. But from the risk management point of view, the odds are not in favour of the investors, from a one year perspective."
He says, "My sense is that the operating margins have peaked, and going forward, operating margins could come under pressure. A whole lot of companies have gone in for capital expenditure, and therefore the return on capital employed will come down. We are also seeing the bottom of the interest rate cycle, so there will be a pressure on margins, on return on net worth and capital employed, in the future.
i would completely with his analysis on the return on capital and other fundamentals. The BSE sensex stocks at an aggregate are returning 20 % + ROE (with the past no.s around 16-18 % at best ). So although the pe are not high , i would kind of wary of putting any more money. on the contrary i have started looking at reducing some of my holdings which seems to be get in the over valued territory.
The complete interview is available in moneycontrol website
http://news.moneycontrol.com/backends/News/frontend/news_detail.php?autono=174200
some snippets below
He says, "I would be comfortable with the levels being below 6000, because if the market goes below the 5500-6000 levels, there would be a lot more trading opportunities. But at this point of time in the market, it is difficult to find stocks with a large margin of safety."
He adds that, a good band of trading for the market would be between 12-18 times earnings, and on that basis the Sensex should be anywhere between 5000-8400 levels.
Parikh says, "At the 7300 levels, the risk reward is not in favour of investors. This does not mean that the markets cannot go up, because on liquidity the markets can go even upto 8000 levels and past that. But from the risk management point of view, the odds are not in favour of the investors, from a one year perspective."
He says, "My sense is that the operating margins have peaked, and going forward, operating margins could come under pressure. A whole lot of companies have gone in for capital expenditure, and therefore the return on capital employed will come down. We are also seeing the bottom of the interest rate cycle, so there will be a pressure on margins, on return on net worth and capital employed, in the future.
i would completely with his analysis on the return on capital and other fundamentals. The BSE sensex stocks at an aggregate are returning 20 % + ROE (with the past no.s around 16-18 % at best ). So although the pe are not high , i would kind of wary of putting any more money. on the contrary i have started looking at reducing some of my holdings which seems to be get in the over valued territory.
Risk Reward ratio not in favor of investors at 7400 levels
Read this interview of chetan parikh (he runs the excellent website capitalideasonline ). He is an exceptional investor from the graham - buffett school of investing and among the few investors whose views i respect.
The complete interview is available in moneycontrol website
http://news.moneycontrol.com/backends/News/frontend/news_detail.php?autono=174200
some snippets below
He says, "I would be comfortable with the levels being below 6000, because if the market goes below the 5500-6000 levels, there would be a lot more trading opportunities. But at this point of time in the market, it is difficult to find stocks with a large margin of safety."
He adds that, a good band of trading for the market would be between 12-18 times earnings, and on that basis the Sensex should be anywhere between 5000-8400 levels.
Parikh says, "At the 7300 levels, the risk reward is not in favour of investors. This does not mean that the markets cannot go up, because on liquidity the markets can go even upto 8000 levels and past that. But from the risk management point of view, the odds are not in favour of the investors, from a one year perspective."
He says, "My sense is that the operating margins have peaked, and going forward, operating margins could come under pressure. A whole lot of companies have gone in for capital expenditure, and therefore the return on capital employed will come down. We are also seeing the bottom of the interest rate cycle, so there will be a pressure on margins, on return on net worth and capital employed, in the future.
i would completely with his analysis on the return on capital and other fundamentals. The BSE sensex stocks at an aggregate are returning 20 % + ROE (with the past no.s around 16-18 % at best ). So although the pe are not high , i would kind of wary of putting any more money. on the contrary i have started looking at reducing some of my holdings which seems to be get in the over valued territory.
The complete interview is available in moneycontrol website
http://news.moneycontrol.com/backends/News/frontend/news_detail.php?autono=174200
some snippets below
He says, "I would be comfortable with the levels being below 6000, because if the market goes below the 5500-6000 levels, there would be a lot more trading opportunities. But at this point of time in the market, it is difficult to find stocks with a large margin of safety."
He adds that, a good band of trading for the market would be between 12-18 times earnings, and on that basis the Sensex should be anywhere between 5000-8400 levels.
Parikh says, "At the 7300 levels, the risk reward is not in favour of investors. This does not mean that the markets cannot go up, because on liquidity the markets can go even upto 8000 levels and past that. But from the risk management point of view, the odds are not in favour of the investors, from a one year perspective."
He says, "My sense is that the operating margins have peaked, and going forward, operating margins could come under pressure. A whole lot of companies have gone in for capital expenditure, and therefore the return on capital employed will come down. We are also seeing the bottom of the interest rate cycle, so there will be a pressure on margins, on return on net worth and capital employed, in the future.
i would completely with his analysis on the return on capital and other fundamentals. The BSE sensex stocks at an aggregate are returning 20 % + ROE (with the past no.s around 16-18 % at best ). So although the pe are not high , i would kind of wary of putting any more money. on the contrary i have started looking at reducing some of my holdings which seems to be get in the over valued territory.
Friday, July 15, 2005
Investing rules from Jim Rogers
Read a very good article on Jim Rogers in capitalideasonline.com . He was a partner with gorge soros , i think, and has published quite a few good books like investment biker etc .
The link is given below
http://www.capitalideasonline.com/articles/index.php?id=1554
some excerpts
Rule 1: Do your own work. Don't be afraid of being a loner.
"I learned early in my career that if you read the annual reports, you've done more than 90% of the people on Wall Street. If you read the notes to the annual report, you've done more than 95% of the people on Wall Street, and if you actually sit down and do a spread sheet, you've done more than 98% of the people on Wall Street." (emphasis mine)
Rule 2: Good investors need a historical perspective.
Rule 3: Think conceptually about the world.
Rule 4: Don't buy stocks at high multiples.
"I don't buy them because, by the time they reach a high multiple, it's probably about time for it to come to an end. Wall Street and politicians are the last to catch on to anything," said Jimmy. He doesn't sell a stock just because it happens to have a high multiple. He either waits for a fundamental change or for an indication that something is about to go wrong.
Rule 5: Be selective in your investing and look for one good idea.
"The most important trick for getting rich on Wall Street is not to lose money. There are many guys," he said, "who do well for two years and then get creamed. Wait until you have a winner and are sure. In the meantime, keep your money in treasury bills. Professional money managers feel that they have to do something all the time and are the worst at following this advice.
"Even if you only have one play every ten years, you're going to do a lot better than most people."
Rule 6: Every investment should be considered a commodity that will be affected by supply and demand changes. It's just a question of when.
Everything has its own supply and demand cycle, which may be a twenty-, thirty-, or fifty-year cycle, and everything is basically a commodity in the end. American Standard was a great growth stock when people went from outdoor to indoor plumbing, but it isn't considered one today. Avon, a cosmetics firm, boomed after the war when the country became more affluent. By the late Sixties, Avon had a multiple of 50, and the market was saturated with many competing cosmetics brands.
Rule 7: Every investor should lose some money, because it teaches you about yourself
The link is given below
http://www.capitalideasonline.com/articles/index.php?id=1554
some excerpts
Rule 1: Do your own work. Don't be afraid of being a loner.
"I learned early in my career that if you read the annual reports, you've done more than 90% of the people on Wall Street. If you read the notes to the annual report, you've done more than 95% of the people on Wall Street, and if you actually sit down and do a spread sheet, you've done more than 98% of the people on Wall Street." (emphasis mine)
Rule 2: Good investors need a historical perspective.
Rule 3: Think conceptually about the world.
Rule 4: Don't buy stocks at high multiples.
"I don't buy them because, by the time they reach a high multiple, it's probably about time for it to come to an end. Wall Street and politicians are the last to catch on to anything," said Jimmy. He doesn't sell a stock just because it happens to have a high multiple. He either waits for a fundamental change or for an indication that something is about to go wrong.
Rule 5: Be selective in your investing and look for one good idea.
"The most important trick for getting rich on Wall Street is not to lose money. There are many guys," he said, "who do well for two years and then get creamed. Wait until you have a winner and are sure. In the meantime, keep your money in treasury bills. Professional money managers feel that they have to do something all the time and are the worst at following this advice.
"Even if you only have one play every ten years, you're going to do a lot better than most people."
Rule 6: Every investment should be considered a commodity that will be affected by supply and demand changes. It's just a question of when.
Everything has its own supply and demand cycle, which may be a twenty-, thirty-, or fifty-year cycle, and everything is basically a commodity in the end. American Standard was a great growth stock when people went from outdoor to indoor plumbing, but it isn't considered one today. Avon, a cosmetics firm, boomed after the war when the country became more affluent. By the late Sixties, Avon had a multiple of 50, and the market was saturated with many competing cosmetics brands.
Rule 7: Every investor should lose some money, because it teaches you about yourself
Investing rules from Jim Rogers
Read a very good article on Jim Rogers in capitalideasonline.com . He was a partner with gorge soros , i think, and has published quite a few good books like investment biker etc .
The link is given below
http://www.capitalideasonline.com/articles/index.php?id=1554
some excerpts
Rule 1: Do your own work. Don't be afraid of being a loner.
"I learned early in my career that if you read the annual reports, you've done more than 90% of the people on Wall Street. If you read the notes to the annual report, you've done more than 95% of the people on Wall Street, and if you actually sit down and do a spread sheet, you've done more than 98% of the people on Wall Street." (emphasis mine)
Rule 2: Good investors need a historical perspective.
Rule 3: Think conceptually about the world.
Rule 4: Don't buy stocks at high multiples.
"I don't buy them because, by the time they reach a high multiple, it's probably about time for it to come to an end. Wall Street and politicians are the last to catch on to anything," said Jimmy. He doesn't sell a stock just because it happens to have a high multiple. He either waits for a fundamental change or for an indication that something is about to go wrong.
Rule 5: Be selective in your investing and look for one good idea.
"The most important trick for getting rich on Wall Street is not to lose money. There are many guys," he said, "who do well for two years and then get creamed. Wait until you have a winner and are sure. In the meantime, keep your money in treasury bills. Professional money managers feel that they have to do something all the time and are the worst at following this advice.
"Even if you only have one play every ten years, you're going to do a lot better than most people."
Rule 6: Every investment should be considered a commodity that will be affected by supply and demand changes. It's just a question of when.
Everything has its own supply and demand cycle, which may be a twenty-, thirty-, or fifty-year cycle, and everything is basically a commodity in the end. American Standard was a great growth stock when people went from outdoor to indoor plumbing, but it isn't considered one today. Avon, a cosmetics firm, boomed after the war when the country became more affluent. By the late Sixties, Avon had a multiple of 50, and the market was saturated with many competing cosmetics brands.
Rule 7: Every investor should lose some money, because it teaches you about yourself
The link is given below
http://www.capitalideasonline.com/articles/index.php?id=1554
some excerpts
Rule 1: Do your own work. Don't be afraid of being a loner.
"I learned early in my career that if you read the annual reports, you've done more than 90% of the people on Wall Street. If you read the notes to the annual report, you've done more than 95% of the people on Wall Street, and if you actually sit down and do a spread sheet, you've done more than 98% of the people on Wall Street." (emphasis mine)
Rule 2: Good investors need a historical perspective.
Rule 3: Think conceptually about the world.
Rule 4: Don't buy stocks at high multiples.
"I don't buy them because, by the time they reach a high multiple, it's probably about time for it to come to an end. Wall Street and politicians are the last to catch on to anything," said Jimmy. He doesn't sell a stock just because it happens to have a high multiple. He either waits for a fundamental change or for an indication that something is about to go wrong.
Rule 5: Be selective in your investing and look for one good idea.
"The most important trick for getting rich on Wall Street is not to lose money. There are many guys," he said, "who do well for two years and then get creamed. Wait until you have a winner and are sure. In the meantime, keep your money in treasury bills. Professional money managers feel that they have to do something all the time and are the worst at following this advice.
"Even if you only have one play every ten years, you're going to do a lot better than most people."
Rule 6: Every investment should be considered a commodity that will be affected by supply and demand changes. It's just a question of when.
Everything has its own supply and demand cycle, which may be a twenty-, thirty-, or fifty-year cycle, and everything is basically a commodity in the end. American Standard was a great growth stock when people went from outdoor to indoor plumbing, but it isn't considered one today. Avon, a cosmetics firm, boomed after the war when the country became more affluent. By the late Sixties, Avon had a multiple of 50, and the market was saturated with many competing cosmetics brands.
Rule 7: Every investor should lose some money, because it teaches you about yourself
Friday, July 08, 2005
Buffett's speech to students at univ of Florida
A free link to the video was posted at www.fool.com by a board member. i have put the link below
http://tinyurl.com/c85or
several very interesting comments by buffett
1. why smart people do dumb things - buffett discussed about the LTCM episode. how a bunch of very smart people with very high IQ and knowledge, managed to blow up everything they had. i like the statement - 'why risk what you have and need for what you dont have and dont need' ? i think this statement is very important to an investor. just think about it ...if i am well off , why do i need to risk my networth for a few extra percentage points and if i am poor , i cannot afford to do it. i guess it makes sense to invest conservatively (in companies with strong competitive advantage )
2. buffett discusses at length the economics of coke / see's and p&g. this was in response to a question on what is it he looks in a business. buffett discusses in detail about the what qualitative factors one should look for in a business. One new point which struck me and kept me thinking is buffetts reference to the pricing power of a company. companies with strong pricing power like coke tend to have a very formidable competitive advantage. in comparison commodity companies have poor or no pricing power (except during supply shortage )
3. buffett also discussed about reit investment and how although the discount to book looks enticing , but is justified due to inability of such companies to move / sell the big amount of real estate on their books
4. buffett talks of various other topics (which he has repeated in several other forums) , like developing good habits (example of taking a 10 % option on your classmate ), not prediciting the market etc
5.buffett also talk of the 'important and knowable' v/s 'important and unknowable' , when some one asked his opinion on interest rates. he pointed out that is better to focus on the first and get into good companies than worry about the second and let go of opportunities.
a very good speech and worth the 1.5 hours (in addition it is free)
http://tinyurl.com/c85or
several very interesting comments by buffett
1. why smart people do dumb things - buffett discussed about the LTCM episode. how a bunch of very smart people with very high IQ and knowledge, managed to blow up everything they had. i like the statement - 'why risk what you have and need for what you dont have and dont need' ? i think this statement is very important to an investor. just think about it ...if i am well off , why do i need to risk my networth for a few extra percentage points and if i am poor , i cannot afford to do it. i guess it makes sense to invest conservatively (in companies with strong competitive advantage )
2. buffett discusses at length the economics of coke / see's and p&g. this was in response to a question on what is it he looks in a business. buffett discusses in detail about the what qualitative factors one should look for in a business. One new point which struck me and kept me thinking is buffetts reference to the pricing power of a company. companies with strong pricing power like coke tend to have a very formidable competitive advantage. in comparison commodity companies have poor or no pricing power (except during supply shortage )
3. buffett also discussed about reit investment and how although the discount to book looks enticing , but is justified due to inability of such companies to move / sell the big amount of real estate on their books
4. buffett talks of various other topics (which he has repeated in several other forums) , like developing good habits (example of taking a 10 % option on your classmate ), not prediciting the market etc
5.buffett also talk of the 'important and knowable' v/s 'important and unknowable' , when some one asked his opinion on interest rates. he pointed out that is better to focus on the first and get into good companies than worry about the second and let go of opportunities.
a very good speech and worth the 1.5 hours (in addition it is free)
Buffett's speech to students at univ of Florida
A free link to the video was posted at www.fool.com by a board member. i have put the link below
http://tinyurl.com/c85or
several very interesting comments by buffett
1. why smart people do dumb things - buffett discussed about the LTCM episode. how a bunch of very smart people with very high IQ and knowledge, managed to blow up everything they had. i like the statement - 'why risk what you have and need for what you dont have and dont need' ? i think this statement is very important to an investor. just think about it ...if i am well off , why do i need to risk my networth for a few extra percentage points and if i am poor , i cannot afford to do it. i guess it makes sense to invest conservatively (in companies with strong competitive advantage )
2. buffett discusses at length the economics of coke / see's and p&g. this was in response to a question on what is it he looks in a business. buffett discusses in detail about the what qualitative factors one should look for in a business. One new point which struck me and kept me thinking is buffetts reference to the pricing power of a company. companies with strong pricing power like coke tend to have a very formidable competitive advantage. in comparison commodity companies have poor or no pricing power (except during supply shortage )
3. buffett also discussed about reit investment and how although the discount to book looks enticing , but is justified due to inability of such companies to move / sell the big amount of real estate on their books
4. buffett talks of various other topics (which he has repeated in several other forums) , like developing good habits (example of taking a 10 % option on your classmate ), not prediciting the market etc
5.buffett also talk of the 'important and knowable' v/s 'important and unknowable' , when some one asked his opinion on interest rates. he pointed out that is better to focus on the first and get into good companies than worry about the second and let go of opportunities.
a very good speech and worth the 1.5 hours (in addition it is free)
http://tinyurl.com/c85or
several very interesting comments by buffett
1. why smart people do dumb things - buffett discussed about the LTCM episode. how a bunch of very smart people with very high IQ and knowledge, managed to blow up everything they had. i like the statement - 'why risk what you have and need for what you dont have and dont need' ? i think this statement is very important to an investor. just think about it ...if i am well off , why do i need to risk my networth for a few extra percentage points and if i am poor , i cannot afford to do it. i guess it makes sense to invest conservatively (in companies with strong competitive advantage )
2. buffett discusses at length the economics of coke / see's and p&g. this was in response to a question on what is it he looks in a business. buffett discusses in detail about the what qualitative factors one should look for in a business. One new point which struck me and kept me thinking is buffetts reference to the pricing power of a company. companies with strong pricing power like coke tend to have a very formidable competitive advantage. in comparison commodity companies have poor or no pricing power (except during supply shortage )
3. buffett also discussed about reit investment and how although the discount to book looks enticing , but is justified due to inability of such companies to move / sell the big amount of real estate on their books
4. buffett talks of various other topics (which he has repeated in several other forums) , like developing good habits (example of taking a 10 % option on your classmate ), not prediciting the market etc
5.buffett also talk of the 'important and knowable' v/s 'important and unknowable' , when some one asked his opinion on interest rates. he pointed out that is better to focus on the first and get into good companies than worry about the second and let go of opportunities.
a very good speech and worth the 1.5 hours (in addition it is free)
Sunday, July 03, 2005
Evaluating the cement industry - porter's model
I have been trying to assess the cement industry on the five factor model and have been able to come to the following evaluation
Entry barrier - Entry barriers are not too high in the industry. The technology is easily available. The only constraint is capital which a big player will have access to. The key barriers would be
- economies of scale which would favor the bigger players like Birla group or Gujarat ambuja
- Brands are not so critical. price plays a big factor
- Cost advantage is critical. Companies which can have a sustainable low cost position will have a competitive advantage. The major players in India do seem to have a similar cost position. Gujarat ambuja has been able to sustain a low cost position and has been able to reward shareholders.
Supplier power - Has very low impact. Mainly limited to coal / power wherein the government pricing would have an impact. But this would be common to all companies
Buyer power - Very low to no impact
substitute product - Almost no substitute product
Rivalry - High rivalry in the industry as the industry is still fragmented. Top 6 players have 60 % capacity as there has been consolidation recently. however local players can have an impact on pricing as cement as the industry depends on local supply. Cement being bulky is generally not transported from long distance
In summary due to low brand strength, high fragmentation, low cost advantages (except in case of some players ), the competitive intensity is high. Pricing is poor and depends on demand scenario. If demand drops , the profitability suffers as the players cut price to run plants at full capacity (due to high fixed costs).
Not an ideal industry for long term investment ( except if one can find a player with a sustainable low cost position )
Entry barrier - Entry barriers are not too high in the industry. The technology is easily available. The only constraint is capital which a big player will have access to. The key barriers would be
- economies of scale which would favor the bigger players like Birla group or Gujarat ambuja
- Brands are not so critical. price plays a big factor
- Cost advantage is critical. Companies which can have a sustainable low cost position will have a competitive advantage. The major players in India do seem to have a similar cost position. Gujarat ambuja has been able to sustain a low cost position and has been able to reward shareholders.
Supplier power - Has very low impact. Mainly limited to coal / power wherein the government pricing would have an impact. But this would be common to all companies
Buyer power - Very low to no impact
substitute product - Almost no substitute product
Rivalry - High rivalry in the industry as the industry is still fragmented. Top 6 players have 60 % capacity as there has been consolidation recently. however local players can have an impact on pricing as cement as the industry depends on local supply. Cement being bulky is generally not transported from long distance
In summary due to low brand strength, high fragmentation, low cost advantages (except in case of some players ), the competitive intensity is high. Pricing is poor and depends on demand scenario. If demand drops , the profitability suffers as the players cut price to run plants at full capacity (due to high fixed costs).
Not an ideal industry for long term investment ( except if one can find a player with a sustainable low cost position )
Evaluating the cement industry - porter's model
I have been trying to assess the cement industry on the five factor model and have been able to come to the following evaluation
Entry barrier - Entry barriers are not too high in the industry. The technology is easily available. The only constraint is capital which a big player will have access to. The key barriers would be
- economies of scale which would favor the bigger players like Birla group or Gujarat ambuja
- Brands are not so critical. price plays a big factor
- Cost advantage is critical. Companies which can have a sustainable low cost position will have a competitive advantage. The major players in India do seem to have a similar cost position. Gujarat ambuja has been able to sustain a low cost position and has been able to reward shareholders.
Supplier power - Has very low impact. Mainly limited to coal / power wherein the government pricing would have an impact. But this would be common to all companies
Buyer power - Very low to no impact
substitute product - Almost no substitute product
Rivalry - High rivalry in the industry as the industry is still fragmented. Top 6 players have 60 % capacity as there has been consolidation recently. however local players can have an impact on pricing as cement as the industry depends on local supply. Cement being bulky is generally not transported from long distance
In summary due to low brand strength, high fragmentation, low cost advantages (except in case of some players ), the competitive intensity is high. Pricing is poor and depends on demand scenario. If demand drops , the profitability suffers as the players cut price to run plants at full capacity (due to high fixed costs).
Not an ideal industry for long term investment ( except if one can find a player with a sustainable low cost position )
Entry barrier - Entry barriers are not too high in the industry. The technology is easily available. The only constraint is capital which a big player will have access to. The key barriers would be
- economies of scale which would favor the bigger players like Birla group or Gujarat ambuja
- Brands are not so critical. price plays a big factor
- Cost advantage is critical. Companies which can have a sustainable low cost position will have a competitive advantage. The major players in India do seem to have a similar cost position. Gujarat ambuja has been able to sustain a low cost position and has been able to reward shareholders.
Supplier power - Has very low impact. Mainly limited to coal / power wherein the government pricing would have an impact. But this would be common to all companies
Buyer power - Very low to no impact
substitute product - Almost no substitute product
Rivalry - High rivalry in the industry as the industry is still fragmented. Top 6 players have 60 % capacity as there has been consolidation recently. however local players can have an impact on pricing as cement as the industry depends on local supply. Cement being bulky is generally not transported from long distance
In summary due to low brand strength, high fragmentation, low cost advantages (except in case of some players ), the competitive intensity is high. Pricing is poor and depends on demand scenario. If demand drops , the profitability suffers as the players cut price to run plants at full capacity (due to high fixed costs).
Not an ideal industry for long term investment ( except if one can find a player with a sustainable low cost position )
Saturday, July 02, 2005
A good website - equitymaster.com
i regularly visit this website (equitymaster.com). One of the few indian websites which focuses on the fundamental analysis of companies and provides a good analysis of their quarterly/ annual results.
In addition, there are sometimes articles (views on news ) which give sensible advise to an investor in terms of various personal finance options .
The knowledge centre is good as it has some good articles on the economics of a number of industries such as cement / FMCG etc. There are some good articles on various investing principles too.
Only disadvantage is that a lot of the content is paid (especially the stock recommendation ). But if you believe in doing your own research and forming your own conclusions, then it is a non issue
In addition, there are sometimes articles (views on news ) which give sensible advise to an investor in terms of various personal finance options .
The knowledge centre is good as it has some good articles on the economics of a number of industries such as cement / FMCG etc. There are some good articles on various investing principles too.
Only disadvantage is that a lot of the content is paid (especially the stock recommendation ). But if you believe in doing your own research and forming your own conclusions, then it is a non issue
A good website - equitymaster.com
i regularly visit this website (equitymaster.com). One of the few indian websites which focuses on the fundamental analysis of companies and provides a good analysis of their quarterly/ annual results.
In addition, there are sometimes articles (views on news ) which give sensible advise to an investor in terms of various personal finance options .
The knowledge centre is good as it has some good articles on the economics of a number of industries such as cement / FMCG etc. There are some good articles on various investing principles too.
Only disadvantage is that a lot of the content is paid (especially the stock recommendation ). But if you believe in doing your own research and forming your own conclusions, then it is a non issue
In addition, there are sometimes articles (views on news ) which give sensible advise to an investor in terms of various personal finance options .
The knowledge centre is good as it has some good articles on the economics of a number of industries such as cement / FMCG etc. There are some good articles on various investing principles too.
Only disadvantage is that a lot of the content is paid (especially the stock recommendation ). But if you believe in doing your own research and forming your own conclusions, then it is a non issue
The market at 7200 ! so what ??
Look at any financial website / papers and there is euphoria all around ...
Cant figure out a rational reason other than that it is good to excite people, get more hits or sell copies.
what's the big deal about 7200 !! or any other number .
The market is selling at 14.3 times backward pe . If the economy does fairly ok , and the corporate profits continue to grow at 10-15 % , then some time in the future we could have the sensex touching 8000 and then maybe 8900 ...provided there is no major shock to the world economy / indian economy ... anyway how does it matter
well if the market was selling at say 20 times pe , then it would matter as i would start selling ..or if it was selling at say 10-11 times pe (like 2003 ) then it would matter ...as one can buy some very good companies at good prices ...but now we have pockets of overvaluation and to be fair pockets of undervaluation ...so it means more work ..
so i guess if the markets shoots to 8000 + soon or drops to 6000 types , then it is action time ...otherwise it is back to reading annual reports and better off watching the discovery channel
seems like a lot of noise ..but then what can once expect from the most of the financial media !!
Cant figure out a rational reason other than that it is good to excite people, get more hits or sell copies.
what's the big deal about 7200 !! or any other number .
The market is selling at 14.3 times backward pe . If the economy does fairly ok , and the corporate profits continue to grow at 10-15 % , then some time in the future we could have the sensex touching 8000 and then maybe 8900 ...provided there is no major shock to the world economy / indian economy ... anyway how does it matter
well if the market was selling at say 20 times pe , then it would matter as i would start selling ..or if it was selling at say 10-11 times pe (like 2003 ) then it would matter ...as one can buy some very good companies at good prices ...but now we have pockets of overvaluation and to be fair pockets of undervaluation ...so it means more work ..
so i guess if the markets shoots to 8000 + soon or drops to 6000 types , then it is action time ...otherwise it is back to reading annual reports and better off watching the discovery channel
seems like a lot of noise ..but then what can once expect from the most of the financial media !!
The market at 7200 ! so what ??
Look at any financial website / papers and there is euphoria all around ...
Cant figure out a rational reason other than that it is good to excite people, get more hits or sell copies.
what's the big deal about 7200 !! or any other number .
The market is selling at 14.3 times backward pe . If the economy does fairly ok , and the corporate profits continue to grow at 10-15 % , then some time in the future we could have the sensex touching 8000 and then maybe 8900 ...provided there is no major shock to the world economy / indian economy ... anyway how does it matter
well if the market was selling at say 20 times pe , then it would matter as i would start selling ..or if it was selling at say 10-11 times pe (like 2003 ) then it would matter ...as one can buy some very good companies at good prices ...but now we have pockets of overvaluation and to be fair pockets of undervaluation ...so it means more work ..
so i guess if the markets shoots to 8000 + soon or drops to 6000 types , then it is action time ...otherwise it is back to reading annual reports and better off watching the discovery channel
seems like a lot of noise ..but then what can once expect from the most of the financial media !!
Cant figure out a rational reason other than that it is good to excite people, get more hits or sell copies.
what's the big deal about 7200 !! or any other number .
The market is selling at 14.3 times backward pe . If the economy does fairly ok , and the corporate profits continue to grow at 10-15 % , then some time in the future we could have the sensex touching 8000 and then maybe 8900 ...provided there is no major shock to the world economy / indian economy ... anyway how does it matter
well if the market was selling at say 20 times pe , then it would matter as i would start selling ..or if it was selling at say 10-11 times pe (like 2003 ) then it would matter ...as one can buy some very good companies at good prices ...but now we have pockets of overvaluation and to be fair pockets of undervaluation ...so it means more work ..
so i guess if the markets shoots to 8000 + soon or drops to 6000 types , then it is action time ...otherwise it is back to reading annual reports and better off watching the discovery channel
seems like a lot of noise ..but then what can once expect from the most of the financial media !!
Porter's discussion of strategy
Read the next chapter of the book - 'on competiton' . This chapter talks about strategy. Porter has detailed the difference between operational excellence and strategy.
Operational excellence to put it simplistically is doing the various operationally activities as efficiently as possible. For example , a company like Gujarat ambuja uses sea transport to move raw material and finished good and has thus reduced its transportation cost. This is operational excellence.
Strategy, according to porter is the specific choice of activities which a firm decides to perform to create a distinctive position or enduring low cost position and thus achieve competitive advantage. for example , blue star has chosen to focus on the commercial airconditioning market and has built its value chain accordingly (although they are still trying to tap the home a/c market)
In addition, by choosing specific activities and performing them differently and ensuring a fit between them, a firm is able to derive a distinct position and a competitive advantage. Such a position is difficult to replicate as a competitor can duplicate some or all the activities but may not be able to manage the fit between the activities and the tradeoffs between the activities (like blue star may focus more R&D v/s carrier would have to focus on a dealer network )
This book is good to get a deep understanding of strategy and how it can create a sustainable competitive advantage
Operational excellence to put it simplistically is doing the various operationally activities as efficiently as possible. For example , a company like Gujarat ambuja uses sea transport to move raw material and finished good and has thus reduced its transportation cost. This is operational excellence.
Strategy, according to porter is the specific choice of activities which a firm decides to perform to create a distinctive position or enduring low cost position and thus achieve competitive advantage. for example , blue star has chosen to focus on the commercial airconditioning market and has built its value chain accordingly (although they are still trying to tap the home a/c market)
In addition, by choosing specific activities and performing them differently and ensuring a fit between them, a firm is able to derive a distinct position and a competitive advantage. Such a position is difficult to replicate as a competitor can duplicate some or all the activities but may not be able to manage the fit between the activities and the tradeoffs between the activities (like blue star may focus more R&D v/s carrier would have to focus on a dealer network )
This book is good to get a deep understanding of strategy and how it can create a sustainable competitive advantage
Porter's discussion of strategy
Read the next chapter of the book - 'on competiton' . This chapter talks about strategy. Porter has detailed the difference between operational excellence and strategy.
Operational excellence to put it simplistically is doing the various operationally activities as efficiently as possible. For example , a company like Gujarat ambuja uses sea transport to move raw material and finished good and has thus reduced its transportation cost. This is operational excellence.
Strategy, according to porter is the specific choice of activities which a firm decides to perform to create a distinctive position or enduring low cost position and thus achieve competitive advantage. for example , blue star has chosen to focus on the commercial airconditioning market and has built its value chain accordingly (although they are still trying to tap the home a/c market)
In addition, by choosing specific activities and performing them differently and ensuring a fit between them, a firm is able to derive a distinct position and a competitive advantage. Such a position is difficult to replicate as a competitor can duplicate some or all the activities but may not be able to manage the fit between the activities and the tradeoffs between the activities (like blue star may focus more R&D v/s carrier would have to focus on a dealer network )
This book is good to get a deep understanding of strategy and how it can create a sustainable competitive advantage
Operational excellence to put it simplistically is doing the various operationally activities as efficiently as possible. For example , a company like Gujarat ambuja uses sea transport to move raw material and finished good and has thus reduced its transportation cost. This is operational excellence.
Strategy, according to porter is the specific choice of activities which a firm decides to perform to create a distinctive position or enduring low cost position and thus achieve competitive advantage. for example , blue star has chosen to focus on the commercial airconditioning market and has built its value chain accordingly (although they are still trying to tap the home a/c market)
In addition, by choosing specific activities and performing them differently and ensuring a fit between them, a firm is able to derive a distinct position and a competitive advantage. Such a position is difficult to replicate as a competitor can duplicate some or all the activities but may not be able to manage the fit between the activities and the tradeoffs between the activities (like blue star may focus more R&D v/s carrier would have to focus on a dealer network )
This book is good to get a deep understanding of strategy and how it can create a sustainable competitive advantage
Tuesday, June 21, 2005
Porter's five forces model and buffet's concept of moat
Buffet refers to the concept of moat or sustainable competitive advantage as one of the most critical factor in determining the returns for a long term investor (in addition to other criteria)
I have been reading porter's book 'on competition' and trying to get a better understanding of how to evaluate a company's competitive advantage for a long term investment.
The five forces model is very helpful in understanding the industry structure and kind of long term returns to expect in an industry. What i was able to 'understand' this time (have read the topic several times ) is that not all the factors are equally important and for an investor it is critical to asses which factors impact the industry and the company more and would influence the long term returns.
More important for a long term investor is to understand, how the five factors of competition will change and determine the future returns.
I am now trying the above exercise for some industries like FMCG/IT services / Banking etc . A good evaluation and insight into the trends would be far more useful that chasing some price targets or trying to predict the next quarter which in munger's words would be 'twaddle'
I have been reading porter's book 'on competition' and trying to get a better understanding of how to evaluate a company's competitive advantage for a long term investment.
The five forces model is very helpful in understanding the industry structure and kind of long term returns to expect in an industry. What i was able to 'understand' this time (have read the topic several times ) is that not all the factors are equally important and for an investor it is critical to asses which factors impact the industry and the company more and would influence the long term returns.
More important for a long term investor is to understand, how the five factors of competition will change and determine the future returns.
I am now trying the above exercise for some industries like FMCG/IT services / Banking etc . A good evaluation and insight into the trends would be far more useful that chasing some price targets or trying to predict the next quarter which in munger's words would be 'twaddle'
Porter's five forces model and buffet's concept of moat
Buffet refers to the concept of moat or sustainable competitive advantage as one of the most critical factor in determining the returns for a long term investor (in addition to other criteria)
I have been reading porter's book 'on competition' and trying to get a better understanding of how to evaluate a company's competitive advantage for a long term investment.
The five forces model is very helpful in understanding the industry structure and kind of long term returns to expect in an industry. What i was able to 'understand' this time (have read the topic several times ) is that not all the factors are equally important and for an investor it is critical to asses which factors impact the industry and the company more and would influence the long term returns.
More important for a long term investor is to understand, how the five factors of competition will change and determine the future returns.
I am now trying the above exercise for some industries like FMCG/IT services / Banking etc . A good evaluation and insight into the trends would be far more useful that chasing some price targets or trying to predict the next quarter which in munger's words would be 'twaddle'
I have been reading porter's book 'on competition' and trying to get a better understanding of how to evaluate a company's competitive advantage for a long term investment.
The five forces model is very helpful in understanding the industry structure and kind of long term returns to expect in an industry. What i was able to 'understand' this time (have read the topic several times ) is that not all the factors are equally important and for an investor it is critical to asses which factors impact the industry and the company more and would influence the long term returns.
More important for a long term investor is to understand, how the five factors of competition will change and determine the future returns.
I am now trying the above exercise for some industries like FMCG/IT services / Banking etc . A good evaluation and insight into the trends would be far more useful that chasing some price targets or trying to predict the next quarter which in munger's words would be 'twaddle'
Wednesday, June 15, 2005
Checking on britannia industries - further update
After the last post, i started analysing britannia further. Liked the following in the company then
- An ROE of 25 %
- almost zero debt
- growth in upper single digits
- A p/e of around 13
- Cash / investment on balance sheet of around Rs 100 / share
In addition the company has good brands, good marketing and distribution infrastructure and reasonable economies of scale.
However on doing a bit of detailed check , i realised that almost 40-50 % of the NP is other income from investment activities which makes the operating pe of almost 20-22 ( after
So the company no longer looks very cheap. in addition i cant get my hands around how the management proposes to use the cash flows. Its core business needs very little cash. They are doing buybacks ...but not much ( share count has come down by some 5 - 10 % ). So the company seems to be piling cash and putting it into various investment.
now the above situation although not worrying , does not excite me into putting my money into the company. Most likely i will watch the company for some more time, before doing something
so i guess its time to move the next company !!!
- An ROE of 25 %
- almost zero debt
- growth in upper single digits
- A p/e of around 13
- Cash / investment on balance sheet of around Rs 100 / share
In addition the company has good brands, good marketing and distribution infrastructure and reasonable economies of scale.
However on doing a bit of detailed check , i realised that almost 40-50 % of the NP is other income from investment activities which makes the operating pe of almost 20-22 ( after
So the company no longer looks very cheap. in addition i cant get my hands around how the management proposes to use the cash flows. Its core business needs very little cash. They are doing buybacks ...but not much ( share count has come down by some 5 - 10 % ). So the company seems to be piling cash and putting it into various investment.
now the above situation although not worrying , does not excite me into putting my money into the company. Most likely i will watch the company for some more time, before doing something
so i guess its time to move the next company !!!
Checking on britannia industries - further update
After the last post, i started analysing britannia further. Liked the following in the company then
- An ROE of 25 %
- almost zero debt
- growth in upper single digits
- A p/e of around 13
- Cash / investment on balance sheet of around Rs 100 / share
In addition the company has good brands, good marketing and distribution infrastructure and reasonable economies of scale.
However on doing a bit of detailed check , i realised that almost 40-50 % of the NP is other income from investment activities which makes the operating pe of almost 20-22 ( after
So the company no longer looks very cheap. in addition i cant get my hands around how the management proposes to use the cash flows. Its core business needs very little cash. They are doing buybacks ...but not much ( share count has come down by some 5 - 10 % ). So the company seems to be piling cash and putting it into various investment.
now the above situation although not worrying , does not excite me into putting my money into the company. Most likely i will watch the company for some more time, before doing something
so i guess its time to move the next company !!!
- An ROE of 25 %
- almost zero debt
- growth in upper single digits
- A p/e of around 13
- Cash / investment on balance sheet of around Rs 100 / share
In addition the company has good brands, good marketing and distribution infrastructure and reasonable economies of scale.
However on doing a bit of detailed check , i realised that almost 40-50 % of the NP is other income from investment activities which makes the operating pe of almost 20-22 ( after
So the company no longer looks very cheap. in addition i cant get my hands around how the management proposes to use the cash flows. Its core business needs very little cash. They are doing buybacks ...but not much ( share count has come down by some 5 - 10 % ). So the company seems to be piling cash and putting it into various investment.
now the above situation although not worrying , does not excite me into putting my money into the company. Most likely i will watch the company for some more time, before doing something
so i guess its time to move the next company !!!
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