Archives for 2011

This Small Book Can Make a Big Difference in Your Investing Life

“When in Rome, do as the Romans do,” goes the famous saying.

What this saying suggests is that you need to know the language and customs of people when you visit an unknown society. Doing so is polite, and also advantageous.

The same holds true when you enter the ‘investing society’. Before you enter, your gate pass must show that you understand the language of business.

And what’s the language of business? The answer – Numbers.
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The Best Strategy for a New Investor

Start early, start small There is great excitement in watching your baby take her first steps.

Slowly…carefully…she gets up…walks a step…then falls down…then again she gets up…takes a step…then again falls down.

The process repeats till the time she learns how to balance her body while taking her second step, and her third step.

As a parent, you would love to hold her hand while she’s learning to take her first steps, but then you want her to do it herself so that she gets some confidence on her own.

This process of learning happens in whatever we do in our lives.

We first learn to take baby steps, before we cross bigger hurdles.

There’s no reason the cycle should be any different when it comes to investing in stock markets.
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3 Stocks I Wouldn’t Touch With a 10-Foot Pole

As a long-term investor and independent analyst, I’m always on the hunt for great businesses that are available for cheap prices.

After all, there is no other way I know of that can help my wealth (whatever little I have currently) compound over the years.

Anyways, my search for such companies involves a lot of hard work. I screen for companies that have had very good past track record. I look for businesses that are easy to understand. And I look for stocks that combine these strengths and are still available for cheap.

But then, as I search for the best businesses, I come across a lot of bad businesses – some that are difficult to understand, and some that are…just bad.

Here are three companies that I believe are really bad businesses to own for investors.
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If You Are 45 or Older, You Won’t Like To Read This

An article in The Wall Street Journal caught my attention recently. It talked about how Americans, regardless of gender or education, become considerably less literate about all things money after age 60.

You see, humans are all the same everywhere. So what applies to Americans, also applies to Indians.

Anyways, the above conclusion was based on a test conducted by Michael Finke, an associate professor from Texas University.

The scores on a test measuring knowledge of investments, insurance, and money basics fell about 2% each year starting after age 60, falling from about 59% correct for those in their 60s to a dismal 30% for those 80 and older.

What was even a worse output of the study was that our confidence in our financial decision-making abilities rises with age. [Read more…] about If You Are 45 or Older, You Won’t Like To Read This

Fasten Your Seat Belt…Air Pocket Ahead

“Europe’s debt crisis is threatening to push large parts of the world into recession,” read a headline in The Telegraph.

The Greeks, the Italians, the French…the Europeans are seemingly all set to bring the entire world economy down to its knees, as if to prove a point to the Americans that they aren’t the only ones to be controlling the ‘recession’ lever.

Anyways, if the woes in Europe and the US aren’t enough, weakening economic growth and corporate profits in India are also playing spoilsport for the stock markets.

Note: Country names represent their respective stock market indices; Source: Yahoo Finance
One company here is asking the government to bail it out because it can’t pay off its debts that it had taken to fund an aggressive growth in the past.
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India’s Greatest Companies: But Should You Buy Them?

You know what’s the most asked question in India?

It is – “What’s the score?”

And the second most?

How about – “How much did the Sensex close at?”

If you live in the financial capital of Mumbai, every business paper you read, every business channel you see, most people you meet in the local train…you will always get to hear someone uttering the ‘Sensex’ word.

There is no doubt that India’s benchmark stock market index (that’s what the Sensex is) can claim to have the largest mindshare among people who invest in stocks, or who are at least interested in reading about stocks.
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A Huge Investing Advantage You Can Easily Achieve Over Most Investors

I’m often asked how an investor can behave calmly when the stock markets rise and fall 1%…2%…even 5% in a single day, day after day.

Well, if you see the trend over the past 3-4 years in the chart below, the volatility (sharp rises and falls) has really been on a higher side, except in 2010 when people were on the sidelines after the gains made in 2009 and 2010.

Data Source: Ace Equity, Safal Niveshak Research
Anyways, when the markets rise and fall 1%… 2%… even 5% in a single day, day after day, you need to remember one thing – that it means nothing.
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Groupon and the Great Stock Market Insanity called ‘IPOs’

IPOs If you follow global financial news, you must have come across reports of the recent IPO of Groupon. Well, for those who haven’t heard of it, Groupon is an online seller of discount coupons, and acts like a ‘deal of the day’ website.

The company’s shares listed on the US exchanges on 4th November, and jumped 31% by the end of the first day of trading. This brought the company’s valuation to more than US$ 16 billion.

How much is US$ 16 billion? Well, that’s more than the respective market capitalization of 14 of India’s top 30 companies on the Sensex.

Now that’s not amazing. What’s amazing is that US investors have paid a high price for a company, which… [Read more…] about Groupon and the Great Stock Market Insanity called ‘IPOs’

My Presentation on Stock Market Investing at TBSS

I recently got the opportunity to lecture on the subject most close to my heart – the art of sensible stock market investing – at Tata Business Support Services (TBSS), Pune.

It was a great first experience. The audience consisted of 30 young and middle-aged executives who were great listeners, going by the questions they asked me after the lecture was over.

Here is my presentation from the lecture. I hope you get the value that you expect of it.

I also take this opportunity to thank Mr. Pradeep Bahuguna, Sr. Manager, Corporate HR at TBSS and an avid reader of The Safal Niveshak Post, without whose support this lecture wouldn’t have happened.

Here’s your presentation. Enjoy it, and please share it with your friends and colleagues who might be interested in learning the art of sensible, independent stock market investing.

If you are not able to view the presentation above, click here to view.

Click here to view the photographs from the lecture.

India’s 7 Most Consistent Cash Generating Companies

Do you remember the story of the three little pigs?

The first little pig built his house with straw, only to see the wolf blow it down. The second pig built his house with sticks and suffered the same fate.

The third pig built his house with bricks. The big, bad wolf huffed and puffed, but he couldn’t blow it down.

So what’s the lesson investors can draw from this story?

Well, it is that in corporate finance, cash is the equivalent of bricks. In fact, smart investors lay a lot of emphasis on companies that generate a plenty of cash as these are in the best position to withstand the huffing and puffing of a slowing economy and competition.
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