Wednesday, November 14, 2007

Nothing Has Changed !

So many entries have been made for this blog into my personal jotter. Entries from the hundreds of pages I read, from articles across the world, and observations, predictions, stories, analysis, and anecdotes from the world of finance, management and investing all shall remain in the pages of my jotter.

in the mean time, here is something which caught my attention, and I think its pretty AWESOME !


Wednesday, November 7, 2007

EQ

People wont remember what you said, or what you made them do... but they will remember... How you made them feel !

Wednesday, October 10, 2007

Core Businesses

  • Once you own a process or system, even though above mediocre, why let it go ?Genereate a cash flow, while trying to master the process. e.g. once you handle financial records of your own small company, why not expand upon it and open up a new financial sector of your business, and provide services to external , non-competitive clients?
  • Also, you need to have a way of stopping other people do the same thing that you do.
  • Managers paid as a % of sales, & weekly meetingsat different locations
  • Internal audits should be stronger than governmental , and other external audits.
  • Always have a personal overview of the finance.

Tuesday, September 18, 2007

Torn between various career choices

Torn between various career choices
Tired of hearing these different voices;
Every move comes with its prices,
Chess game, checkers and a lot of dices!

Follow the corporate dream and be
A deadline meeting exec at P & G;
Coffee, useless talk and not so great pay,
While my biz major friends are raking in the hay!

Follow the great American dream and be
The CEO of your own startup company;
Desi parents, lawsuits and stupid workforce,
While my art major friends have their own racing horse!

Follow a director’s lenses and be
A model, an actor, a music company;
Politics, old age instability
While my finance major friends drive
A BMW with German reliability!

Follow the Vinod Khosla life and be
Yet another venture capitalist with great pedigree;
Few successes, lots of risk, many failures,
In this many optioned world of capitalist tenures.

Torn between various career choices
Tired of hearing these different voices;
Every move comes with its prices,
Chess game, checkers and a lot of dices!

Sunday, August 12, 2007

Warren Buffett gems and peter lynch

Warren Buffett's secrets of success

August 10, 2007


Warren Buffett, Chairman of Berkshire Hathaway, is arguably the world's greatest investor and the third richest man with a net worth exceeding $52 billion (Rs 213,200 crore). He is also a great philanthropist: last year he declared plans to give away over $37 billion (Rs 151,700 crore) in charity, to the Bill & Melinda Gates Foundation.

But he is not just a man with a large heart and a matching wallet. Also known as The Sage of Omaha, he is also full of wisdom and wit.

Here are some of his gems of advice for investors who look at the stock market to make a fortune, culled from various publications, his speeches and writings:

• 'Never invest in a business you cannot understand.'

• 'Always invest for the long term.'

• 'Remember that the stock market is manic-depressive.'

• 'Buy a business, don't rent stocks.'

• 'Price is what you pay. Value is what you get.'

• 'Stop trying to predict the direction of the stock market, the economy, interest rates, or elections.'

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

• 'Wall Street is the only place that people ride to in a Rolls-Royce to get advice from those who take the subway.'

• 'Buy companies with strong histories of profitability and with a dominant business franchise.'

• 'It is optimism that is the enemy of the rational buyer.'

• 'As far as you are concerned, the stock market does not exist. Ignore it.'

• 'The ability to say 'no' is a tremendous advantage for an investor.'

• 'If you're doing something you love, you're more likely to put your all into it, and that generally equates to making money.'

My idea of a group decision is to look in the mirror.'

• 'Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can't buy what is popular and do well.'

• 'The smarter the journalists are, the better off society is.'

• 'Success in investing doesn't correlate with IQ once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.'

• 'Diversification is a protection against ignorance. It makes very little sense for those who know what they're doing.'

• 'You're neither right nor wrong because other people agree with you. You're right because your facts are right and your reasoning is right - that's the only thing that makes you right. And if your facts and reasoning are right, you don't have to worry about anybody else.'

• 'There seems to be some perverse human characteristic that likes to make easy things difficult.'

• 'In the short run, the market is a voting machine but in the long run it is a weighing machine.'

• 'It's only when the tide goes out that you learn who's been swimming naked.'

• 'Somebody once said that in looking for people to hire, you look for three qualities: integrity, intelligence, and energy. And if they don't have the first, the other two will kill you. You think about it; it's true. If you hire somebody without the first, you really want them to be dumb and lazy.'

• 'There are three kinds of people in the world: those who can count, and those who can't.'

• 'It takes 20 years to build a reputation and five minutes to lose it.'

• 'The first rule is not to lose. The second rule is not to forget the first rule.'

• 'Wide diversification is only required when investors do not understand what they are doing.'

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

• 'We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.'

• 'Our favourite holding period is forever.'

• 'If past history was all there was to the game, the richest people would be librarians.'

• 'Why not invest your assets in the companies you really like? As Mae West said, 'Too much of a good thing can be wonderful.''

• 'Your premium brand had better be delivering something special, or it's not going to get the business.'

• 'You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.'

• 'We do not view the company itself as the ultimate owner of our business assets but instead view the company as a conduit through which our shareholders own assets.'

• 'Accounting consequences do not influence our operating or capital-allocation decisions. When acquisition costs are similar, we much prefer to purchase $2 of earnings that is not reportable by us under standard accounting principles than to purchase $1 of earnings that is reportable.'

• 'Unless you can watch your stock holding decline by 50% without becoming panic-stricken, you should not be in the stock market.'

• 'The critical investment factor is determining the intrinsic value of a business and paying a fair or bargain price.'

• 'Risk can be greatly reduced by concentrating on only a few holdings.'

• 'Much success can be attributed to inactivity. Most investors cannot resist the temptation to constantly buy and sell.'

• 'Lethargy, bordering on sloth should remain the cornerstone of an investment style.'

• 'An investor should act as though he had a lifetime decision card with just twenty punches on it.'

• 'An investor needs to do very few things right as long as he or she avoids big mistakes.'

• 'Turnarounds' seldom turn.'

• 'The advice 'you never go broke taking a profit' is foolish.'

• 'It is more important to say 'no' to an opportunity, than to say 'yes.'

• 'It is not necessary to do extraordinary things to get extraordinary results.'

• 'An investor should ordinarily hold a small piece of an outstanding business with the same tenacity that an owner would exhibit if he owned all of that business.'

• 'It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently.'

• 'In the business world, the rearview mirror is always clearer than the windshield.'

• 'A public-opinion poll is no substitute for thought.'

• 'It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.'

• 'The business schools reward difficult complex behavior more than simple behavior, but simple behavior is more effective.'

• 'Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it.'

• 'The investor of today does not profit from yesterday's growth.'

• 'Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.'

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

• 'I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.'

• 'I always knew I was going to be rich. I don't think I ever doubted it for a minute.'

• 'We enjoy the process far more than the proceeds.'

• 'You do things when the opportunities come along. I've had periods in my life when I've had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.'

• 'I buy expensive suits. They just look cheap on me.'

• 'Let blockheads read what blockheads wrote.'

• 'I do not like debt and do not like to invest in companies that have too much debt, particularly long-term debt. With long-term debt, increases in interest rates can drastically affect company profits and make future cash flows less predictable.'

• 'My grandfather would sell me Wrigley's chewing gum and I would go door to door around my neighbourhood selling it. He also sold me a Coca-Cola for a quarter and I would sell it for a nickel each in the neighbourhood, so I made a small profit. I was always trying to do something like this.'

• 'A public-opinion poll is no substitute for thought.'

Peter Lynch

Every country has its famous mutual fund managers. The United States of America has had its fair share of them, but probably none more famous than Peter Lynch.

Lynch started managing the Fidelity Magellan Fund, in 1977, and was at the helm of things for the next 13 years. In 11 out of the 13 years, the Magellan fund gave more returns than the S&P 500 index, delivering an astonishing return of 29% per year.

One dollar invested in the scheme in 1977 would have amounted to around $27 by the time Lynch retired from active fund management in 1990.

Since 1990, Lynch has gotten around to writing various books on investing along with journalist John Rothschild. The first of the series being One Up on the Wall Street.

In this book he shares his thought process and the steps he followed that made him such a successful fund manager.

Here are five investing gems from this book:

1. Don't listen to stock market experts

The first and foremost advice that Lynch gives is to stop listening to experts. He writes, "But the rule number one, in my book, is: Stop listening to professionals! Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks just as well, if not better, than the average Wall Street expert."

Having said that Lynch feels that investing on their own for investors is a difficult exercise. He further writes, "That means ignoring the hot tips, the recommendations from brokerage houses, and the latest 'can't miss' suggestions from your favourite newsletter -- in favour of your own research. It means ignoring the stocks that you hear Peter Lynch, or some similar authority, is buying."

2. Invest in mutual funds

If an investor feels that he has the expertise to invest on his own, then he should be trying to outperform the market, i.e. generate a return that is greater than that of the market. If he cannot, the simple thing to do is to just invest in mutual funds.

Lynch writes, "Moreover, when you pick up your own stocks, you ought to outperform the experts. Otherwise, why bother?"

If the investor does not have the capability to outperform the market, then it doesn't make much sense for him to go about investing in stocks. Investing in mutual funds is a much better bet. "The mutual fund is a wonderful invention for people who have neither the time nor the inclination to test their wits against the stock market, as well as for people with small amount of money to invest who seek diversification," he writes further.

3. Believe in the power of compounding

Lynch narrates a small story to illustrate the power of compounding and drive home the fact that the earlier you start investing the better it is.

"Consider the Indians of Manhattan, who in 1625 sold all their real estate to a group of immigrants for $24 in trinkets and beads. For 362 years, the Indians have been the subjects of cruel jokes because of it -- but it turns out that they may have made a better deal than the buyers who got the island. At 8% interest on $24 (Note: Let's suspend our disbelief and assume they converted the trinkets to cash) compounded over all those years, the Indians would have built up a net worth just short $30 trillion, while the latest tax records from the Borough of Manhattan show the real estate to be worth only $28.1 billion. Give Manhattan the benefit of doubt: that $28.1 billion is the assessed value, and for all anybody knows, it may be worth twice that on the open market. So Manhattan's worth $56.2 billion. Either way, the Indians could be ahead by $29 trillion and change."

4. You don't need an education in business subjects to pick up stocks

Peter Lynch did not study accounting, neither did he get around to doing an MBA, the subjects considered most necessary to pick up the right stocks.

As he writes, "In college, except for obligatory courses, I avoided science, math, and accounting -- all normal preparation for business."

"Investing in stocks is an art, not a science, and people who've been trained to rigidly quantify everything have a big disadvantage. If stockpicking could be quantified, you could rent time on the nearest Cray computer and make a fortune. But it doesn't work that way. All the math you need in the stock market (Chrysler's got $1 billion in cash, $500 million in long term debt, etc) you get in the fourth grade."

So what is it that made him so successful in picking up the right kind of stocks.

"Logic is the subject that's helped me the most in picking stocks, if only because it taught me to identify the peculiar illogic of Wall Street. Actually Wall Street thinks just as the Greeks did. The early Greeks used to sit around for days and debate how many teeth a horse has. They thought they could figure it out by just sitting there, instead of checking the horse. A lot of investors sit around and debate, whether a stock is going up, as if the financial muse will give them the answer, instead of checking the company."

5. Learn to trust your gut feeling

Since investing is more an art than a science. Things are never very clear in the stock market. "Things are never clear on Wall Street, or when they are, then it's too late to profit from them. The scientific mind that needs to know all the data will be thwarted here," pens Lynch.

Hence, the most important thing in such a situation is to trust your gut feel. As Lynch says, "It is the rare investor who doesn't secretly harbour the conviction that he or she has a knack for divining stock prices or gold prices or interest rates. Inspite of the fact that most of us have been proven wrong again and again, it's uncanny how often people feel most strongly that stocks are going to go up or the economy is going to improve just when the opposite occurs."

"When it comes to predicting the market, the important skill here is not listening, it's snoring. The trick is not to learn to trust your gut feelings, but rather to discipline yourself to ignore them. Stand by your stocks as long as the fundamental story of the company hasn't changed."

Friday, August 10, 2007

A true vacation since detroit 2006 !

  • · Chevy HHR – silver
  • · Music collection :
  • o Kaante songs,
  • o Fiza songs
  • o Gentleman songs
  • o Oceans 12 OST
  • o Pyaar tune kya kiya
  • o Maine Pyaar Kiya
  • o Bombay Dreams
  • · Country side fields
  • · Constant DJ driving ( its where u DJ while driving )
  • · Lodging in a paid for hotel
  • · Sleep...Lots of it!
  • · Dinner with friends at this uber-expensive Chinese restaurant ( of course paid for )
  • · The Simpsons
  • · Sleep…Lots of it!
  • · Breakfast
  • · Sleep…Lots of it!
  • · A very positive physical reading during the drug test
  • · Exercise…Lots of it!
  • · Sleep…lots of it!
  • · Out with friends again… small kid of 21 months
  • · Realization that my friends from hometown will be soon gone to different places, and our group will be kind of disintegrated
  • · Lots of phone calls
  • · Starbucks Coffee at midnight
  • · The Black Swan
  • · Charlie Rose and Kofi Annan
  • · Jim Cramer and Donny Duetsch’s “The big idea “
  • · Fast money MBA Challenge ( I knew more answers than the MBAs from top 10 in USA )
  • · Sleep…Lots of it!
  • · Drive back with the awesome music collection
  • · Come back home
  • · Sleep…Lots of it!
  • · Macaroni Grill and lots of good times with younger brother and his friend
  • · Sleep…Lots of it!

Friday, August 3, 2007

Value Investing Part 1

www.yardeni.com

Value opportunities lie in < $1 billion in market cap and mid-cap companies

How many of the food chains are public? Is their model reliable, dependable, and do you see that company in business after 20 years? 10 years?

Find the total assets of a company, Assets/outstanding share should be equal to the stock price.

(Current Assets –current liabilities-long term debts)/shares outstanding should be equal to share price

Bargain stocks have lower P/E ratio than past P/E for that stock at an average of 5 years. Avoid P/E > 20

Intrinsic Value: E (2r +8.5) * (4.4/Y)

E = annual earnings per share

R = annual growth rate

8.5 = P/E for a no-growth stock

Y = interest rate on corporate bonds

1

E/P is 2(Corporate bond yield)

Risk

2

P/E = 0.4 (highest P/E in 5 years)

Risk

3

Dividend Yield = 2/3 (corporation bond yield )

Risk

4

Stock Price = 2/3 (net Current asset value)

Risk

5

Assets/Liabilities > 2

Financial Strength

6

Total Debt <>

Financial Strength

7

Earnings doubled in 10 years

Earning Stability

8

Earnings declined <>

Earning Stability

Acquire insurance companies, and look at their financials.