Archives for February 2019
Wasted Hours and Saved Years
Andrew Carnegie and Henry Ford are considered among the handful of capitalists who played a defining role in building America. The early 20th century skyscrapers in the US stood on Carnegie’s steel and Ford revolutionized the automobile industry with his low-cost cars.
Carnegie became the richest man in America when he retired and sold his company to JP Morgan for a sum that was equivalent to $400 billion in today’s money. Sadly, Andrew’s billions were amassed at the cost of factory workers’ sweat and blood. Literally.
The working conditions in steel mills in the late 19th century and early 20th century were inhumane and unsafe. Some estimate that the rate of serious accidents (often leading to death) was as high as 10 percent. Twelve to fourteen hours a day and six to seven days a week was standard at that time. There was no extra pay for overtime. Not only that, the hourly wages were squeezed so the hilt to drive profitability. And any resistance from labour unions was often crushed ruthlessly with the help of private armies like Pinkertons. (Trivia: at one time Pinkertons had more armed personnel in their squad than the entire US national army.)
My Notes on Warren Buffett’s 2018 Letter to Shareholders
Warren Buffett recently released his 2018 letter to shareholders of Berkshire Hathaway.
I have prepared some notes on the letter. Click here to download my notes.
Also, I was on ET Now yesterday to share my thoughts on the letter. Here is the video of the chat (click here to watch the video, or watch below) –
Sherlock Holmes’ Thinking Blueprint, Greatest Investor You’ve Never Heard Of, And Marcus Aurelius On Mortality
Here’s something new I have initiated to share with you stuff I am reading and thinking about in recent times.
Click here to download the document.
Let me know your thoughts on the initiative, and what else you would like to see here.
How to Screen for Stock Ideas
While I am not a big fan of using readymade screeners to generate stock ideas – because you tend to substitute thinking with a lot of data – simple screeners still help me in doing the initial groundwork.
Also, while there are a few paid (and expensive) screeners available in the market – like Ace Equity, Capital Line – I find a few free screeners to be very effective when it comes to the value I can derive from using them.
In this post, I explain the few steps you can use while running once such free screener – Screener.in – to do basic analysis on companies and screen for high quality ideas. Let’s start right away.
Behaviouronomics: Chartist’s Illusion
A picture, they say, speaks a thousand words. There’s something magical about colourful shapes and lines that make them attractive to human eyes. Homo Sapiens’ love for pictures dates back to the time when our ancestors lived the life of hunter-gatherers.
Below is a painting from Lascaux Cave. It’s estimated that it was created by our ancestors 15,000–20,000 years ago.
The lizard brain inside our skull — that part of our mental machinery which has remained unchanged for millions of years — is pretty acquainted with pictures, images, and colourful shapes. The ability to recognize shapes, lines, and contours gave our ancestors an evolutionary advantage to survive in a hostile environment.
My Talk at Value Investing Summit, Kuala Lumpur
I recently spoke at the Value Investing Summit in Kuala Lumpur, Malaysia. My topic was ‘The Path of Successful Investing.’
Click here to download the presentation.
Click here to watch the video of my talk, or watch below.
P.S. In the talk, I quoted Peter Bernstein’s book Against the Gods as containing the story of the hedge fund LTCM. It was a mistake! The book that chronicles the story of LTCM is Roger Lowenstein’s When Genius Failed.
Statutory Warning: Nothing in my talk should be construed as investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. My analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).
Wall of Ideas
Welcome to Safal Niveshak’s Wall of Ideas, where I present hand-drawn illustrations of a few thoughts on investing, learning, decision-making, and living.
The permanent home of these illustrations lies here, where all my future updates will happen.
If you like what you see below, please share your love in the Comments section of this post. Also, please share your ideas for future such illustrations.
Sharing the illustrations socially – Twitter, Facebook, LinkedIn, etc. – would also help spread the word. Thank you!
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Bookworm: The Devil’s Financial Dictionary By Jason Zweig
Jason Zweig, a WSJ columnist, is famous for writing the commentary for the most popular edition of the investment classic — The Intelligent Investor by Benjamin Graham. Warren Buffett claims that when he read Graham’s book in 1949, it changed his life forever.
With his unique writing style, Zweig made Graham’s book doubly valuable by bringing in the perspectives from today’s market. In his commentary, Zweig drew parallels between Graham’s examples and today’s financial headlines, which gives readers a deeper understanding of Graham’s principles in the modern context. Zweig is a history buff and his genius is in bringing in historical perspectives on today’s seemingly important financial news.
In Sept 2016 issue of VIA, I had written about Jason Zweig’s other book Your Money Your Brain which was based on insights from the field of behavioural finance. The one I am going to talk about in this edition of Book Worm is Zweig’s latest piece of artful work — The Devil’s Financial Dictionary.
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The Low-Priced Way to Lose Money in the Stock Market
Once upon a time, I used to recommend stocks. I did that for a living.
One of the most common questions I received when I recommended a stock priced in three or four digits was this – “What is the point of buying a stock this expensive? Recommend something under Rs 100, or better, Rs 10, or better, Rs 5.”
The reasoning was simple – “It’s easier for a Rs 10 stock to go Rs 100, than for a Rs 1,000 stock to go to Rs 10,000.”
At the start of my career, this reasoning sounded reasonable. But it turned out to be one of the biggest misconceptions I’ve ever had in my career as a stock analyst and investor. Thankfully, I got over that misconception early.
Of course, a car that sells at Rs 20 lac may be more expensive than one that sells at Rs 5 lac, even when you discount for better features etc. But a stock that sells for Rs 2,000 or even Rs 20,000 is “not” more expensive than a stock that sells for Rs 20 or Rs 200, just because of its price tag.
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