Archives for September 2014

Seeking Wisdom in the Age of Information

T.S. Eliot posed the question more than fifty years ago – “Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?”

These questions find much greater relevance fifty years later, in an age of accelerated information and information overload, when people are living larger parts of their lives on Facebook and Twitter than with their families and ‘real’ friends.

The rate and way in which we receive information has changed dramatically – from newspapers and television to constant news online. In fact, we have made our personal lives available to the world in tweetable and retweetable moments.

Now, as much as we try to stop consuming the vast amounts of information coming at us, we wrestle against the paranoia of ‘missing out’ on important information or being out of the loop on something.

This is especially true when it comes to stock market information. As if the second-by-second changing stocks prices were not enough, we are seeing analysis of these changes at a similar pace if not faster.

Mastermind Value Investing Course: Less than 35 early bird seats remain for my premium online course in Value Investing. So, if you are interested and wish to save Rs 1,000/- in early bird discount, I invite you to join Mastermind right away. Click here to join now.

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I Own the World’s Best Business, and So Can You

I got a couple of emails from readers a few days back. The first email read…

Vishal, I would like to start a business of my own where I can put my passion of teaching Math into practice, and also earn my living out of it. I really love the way you are conducting your own business. So can you help me with the tools to start my own business?

The second email read…

Is it really possible to start a new small business that also becomes profitable over the years, given that there is so much competition all around? Also, do I really need to quit my job to start something of my own like you have done? I am not yet in a position to give up the security of a regular paycheque.

Well, here is something I wrote an year ago that is my best answer to the above two emails. I am sure many others also feel this constant urge of starting something of their own so that they can take their life’s control in their own hands.

If you are one of them, I hope you find reading what follows worthwhile and helpful in guiding you in your own journey.

Mastermind Value Investing Course: Less than 50 early bird seats remain for my premium online course in Value Investing. So, if you are interested and wish to save Rs 1,000/- in early bird discount, I invite you to join Mastermind right away. Click here to join now.

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Mastermind Value Investing Course: Admission Opens on 25th Sept. 2014

After innumerable requests and emails from readers to re-open admissions to my premium course in Value Investing – The Safal Niveshak Mastermind – I’m finally doing it.

Admission to the third batch of Mastermind will open on 25th September 2014 (this Thursday), and will remain so till 5th October 2014.

My idea through Mastermind is simple – to help you with a simple, common-sense approach to successful investing, so that you can avoid the uncertainty and outlandish time you would otherwise spend doing it all alone.

If you are interested to know more about the Course, I invite you to visit a new website I have designed especially for the same. You will get all details of Mastermind there.

Click here to visit Mastermind website
After reading through the details, if you have any further question(s) about the Course, please write to me at vishal@safalniveshak.com, or call me at +91-8097073918.

By the way, here is what a couple of Mastermind students have to say about the Course…

This is one of the best courses I have ever done. As a true value investor, this is one of the best investments I have made. I thoroughly enjoyed the course and would be happy to recommend the course to anyone who is interested in value investing.

Your course is the true example of ‘The more you learn, the more you’ll earn.’

~ Antony Sakkariyas

Aristotle said – “Those who know, do. Those who understand, teach.” Vishal does both!

Vishal’s course has given me the investing tools and explained how to use them as well. I have learnt a lot from the lessons and I must say I find myself indebted to Vishal’s teachings. I haven’t made significant money from them (I am sure I will with time) but I have definitely learnt how not to lose it, which, if I am to quote Warren Buffett, is a significant achievement in itself.

If you are interested in the field of investment and want to learn the basics (there probably isn’t much to learn beyond the basics!) then join Vishal’s course. It won’t promise you money but you will keep what you have and will understand how the game must be played to increase your chances of success.

~ Varenya Agrawal

Click here to visit Mastermind website
Remember, admission for the third batch opens on Thursday, 25th September 2014.

Want to Learn Charlie Munger’s Way of Thinking?

According to Colby, men will confess to treason, murder, arson, false teeth, or a wig, but not to a lack of humour.

This, I believe also happens with creative thinking.

So people, in general, like to think that they are creative thinkers, don’t even consider otherwise and, you know what, they may be right!

Most of us can become creative thinkers. It’s just that we need a catalyst to bring forth our innate thinking powers.

Roger von Oech's Creative Whack Pack One such amazing catalyst I found out two years back, through a recommendation from Prof. Sanjay Bakshi, is Roger von Oech’s Creative Whack Pack.

This is a great tool to practice thinking like Charlie Munger does – combining various ideas from different spheres of life and joining them to create a process of thinking creatively – the latticework of mental models, as he calls it.

The pack consists of a deck of 64 cards divided in four suits. Each card gives a bite-sized story or situation and a strategy that may be adapted to the problem or concept the user is working on.

The idea is that drawing cards singly or in combination and considering the strategy can shift the user’s mind to previously unexplored, creative directions.

While this entire pack of cards has helped my thought process immensely over these past two years, here are four cards that have helped me as far as my investment thinking is concerned.

The text in quotes below is from the respective card.

Interview with Basant Maheshwari – Part 4

Disclaimer: Please note that the views expressed in this interview are those of Mr. Basant Maheshwari and do not necessarily represent the views of, and should not be attributed to, Safal Niveshak.

Also Read – Part 1 | Part 2 | Part 3

Safal Niveshak (SN): One of the problems that new or small investors face is that they can’t really get their heads around valuation. It seems so complex. A lot of the terminology is complex, and so are the concepts. How can valuations be made easier? How have you made it easier? Or can it not be made easier?

Basant Maheshwari (BM): There are two aspects to valuation. One is to evaluate the longevity of the business, which is what Buffett talks about – the business quality, moats, etc. But since we can’t get numbers on them, we don’t do it.

Now, while starting a valuation sheet, how many people ask this question on the first row of the excel sheet – “Is this company going to remain in business by, say, 2020?” Most people don’t do!

Interview with Basant Maheshwari – Part 3

Also Read – Part 1 | Part 2

Safal Niveshak (SN): Do you believe in the importance of maintaining an investment checklist? If yes, what are the most important points on your checklist?

Basant Maheshwari (BM): Let’s take an example of, say, a company like ITC. The first question I will ask is, “Is it cyclical or non-cyclical?” It’s not cyclical. So, basically it means that you can predict.

I assume that I don’t know anything about ITC. Now, I will open the company’s annual reports and see the fourth year figure. So if I’m in FY14, I will see how much revenue it earned in FY10.

From FY10 to FY14, in four years, it has got to double. If the revenue has not doubled in four years, then I don’t get excited. I am just looking at revenue at the moment. I have not yet dabbled with profits.

I will then look at the return on equity (ROE). ROE should be more than 25%. Then, if I find the ROE to be above 25%, I will look at the dividend yield.

Charlie Munger’s Six Secrets to Winning Big in Investing

Charlie Munger, business partner of Warren Buffett and vice chairman of Berkshire Hathaway, recently did an interview with Jason Zweig published by the Wall Street Journal. You can read Zweig’s notes from the interview here.

Here are the six simple but big-big ideas I’ve pulled out from WSJ’s interview of Charlie Munger – these are all you need to become a smarter investor, if you can ingrain these in your investment philosophy and practice them while making your decisions.

Over to Charlie!

Interview with Basant Maheshwari – Part 2

Click here to read Part 1 of the interview.

Safal Niveshak (SN): Compared to when you started investing in 1992, the sheer amount of irrelevant information faced by investors is truly staggering today. How can investors trapped by irrelevant information make independent investment decisions? What are the 4-5 factors investors can use to improve the quality of their decision making?

Basant Maheshwari (BM): You have to look at a piece of information and ask, “What difference does it make to the company that I own?” Like, I bought Pantaloon and made money. That’s well-documented everywhere.

When Pantaloon was doing its books, it used to carry inventory at sales minus gross margin. Normally, you have to do at cost or market value, whichever is lower. So there was a buffer there.

So if the inventory should’ve been valued at Rs 40 crore, they used to value it at Rs 60 or 70 crore. There was a lot of hue and cry about this. People said, “They’re overvaluing it!”

Value Investing Workshop in Bangalore on 1st Nov. 2014 (Sat). Register here to claim an early bird discount – https://t.co/VoXkYaHm9q

— Vishal Khandelwal (@safalniveshak) September 12, 2014

At that point, I was also into this confusion as to how to evaluate this inventory part of Pantaloon. Then, one day as I was thinking about it, I thought of calculating how much it worked to. It came to about Rs 20-30 crore. Compared to this, the company’s market cap was about Rs 1,000 crore. The company was making more than Rs 20 crore in quarterly profit. So anybody would have said, “What difference does it make anyways? Pantaloon can write it off in one quarter.”

Interview with Basant Maheshwari – Part 1

I was recently in Kolkata for my Value Investing workshop, where I received an amazing response. Beyond my expectations, the number of people who attended the same exceeded the count in Mumbai and Delhi as well. And I’m sure they found some value in the Workshop, as their smiles show. 🙂

Attendees at Safal Niveshak's Value Investing Workshop in Kolkata

My next workshop is in Bangalore on 1st November (Saturday). If you are interested to join, click here to register now.

Anyways, during my Kolkata trip, I also met up with Mr. Basant Maheshwari, founder of The Equity Desk and author of The Thoughtful Investor, for an interview for Safal Niveshak. Given that we talked for almost two hours, I have broken up the interview in several parts.

Safal Niveshak's Interview of Basant Maheshwari

Before sharing my notes from the interview, please note that the views expressed herein are those of Mr. Basant Maheshwari and do not necessarily represent the views of, and should not be attributed to, Safal Niveshak.

Over to Mr. Maheshwari.

Safal Niveshak TribeStar: A Curious, Passionate Investor

After a long-long gap, and after profiling the ever-so-amazing R.K. Chandrasekhar and Dev Ashish in the first two issues of Safal Niveshak TribeStar, I bring to you another young investing star in the making, Nishanth Muralidhar.

Nishanth is a 32-year old IT software engineer, hailing from Kerala and currently residing in the US. He has been investing in the Indian stock market for eight years now and is a keen follower of value investing.

Over to you Nishanth!

Safal Niveshak: Please share with us your investment journey so far.

Nishanth Muralidhar: My investing journey, started at the age of 23, when I started my IT career in 2004. Right from the very first salary I received, I explored various investing options and stumbled upon equity mutual funds.

Through a series of articles in Value Research and other websites, I understood the basics of mutual funds and decided to invest in them. I picked 3 of the best funds out then – Reliance Vision, Franklin Indian Prima, and HDFC Equity. I didn’t have the faintest idea regarding asset allocation or diversification at that time; however I had read about the power of compounding.

I opened a demat account and decided to foray into direct equity investing. I started investing in stocks based on the recommendations from various stock brokers and websites. I had only a rudimentary idea of the PE ratio and knew nothing else about these stocks. I didn’t read the annual reports, balance sheets, income statements or cash flow statements.