Archives for June 2020

Bitter Truths of Stock Valuation…and How You May Avoid Them

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Also Check: The Safal Niveshak Podcast

One of the key topics that I cover during my value investing workshops and courses is valuations i.e., importance of valuations and the process of valuing stocks. But before I start this specific section, I warn members about two bitter truths of valuations and how they can avoid them.

I first learned these truths during my reading of Aswath Damodaran, Professor of Finance at the Stern School of Business at New York University, where he teaches corporate finance and equity valuation. He is widely quoted on the subject of valuation, with “a great reputation as a teacher and authority”. In other words, Damodaran is to business valuations what Peter Drucker was to business strategy.

Couple of years back, I read his The Little Book of Valuation, wherein the first chapter reiterates an important fact about “value” – that it’s more than a number, and that understanding it well is a way to stay ahead of the pack.

The Fundamental Things Apply, As Time Goes By

Here is your weekly Saturday newsletter, where I share the latest updates from the site, a new idea worth thinking about, few stories you shouldn’t miss, a question from my mailbox, and a question for you. Let’s get started.

On SN This Week

Be Water, My Friend

The Safal Niveshak Podcast Update: I launched my podcast recently, where I plan to share insights on stock market investing, wealth creation, behavioural finance, and lifelong learning. Click here to visit the Podcast page. You may also subscribe on Apple Podcasts, YouTube, Spotify, and Stitcher

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Audio

Listen on: Apple Podcasts | Youtube | Download

Transcript
“It is not the strongest or the most intelligent who will survive but those who can best manage change. ~ Charles Darwin

The thing that separates us humans from other animals is that we constantly change into new forms, new avatars. We are sad, we are happy, we are emotional, and we are angry. We communicate through different languages, we do different kinds of work, and we deal with different kind of people differently. Effectively, we keep on changing ourselves as per the demands of time and situation.

In fact, success in life depends largely on whether we are able to change ourselves with changing times.

[Read more…] about Be Water, My Friend

Investing and the Art of Wait

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Tennis is one of my favourite sports simply for the individual brilliance, fearlessness, and electric atmosphere that is on display. Plus, as a tennis player, you have to take the entire onus upon yourself whether you win or lose, which I kind of like.

How Fortunes are Made in Stock Market

I’ve started work on a series of podcasts (finally!), and here’s the latest one on how fortunes are made in the stock market. Let me know how you find it, and your feedback and suggestions to improve the same. Thank you!

Audio

The Magical Rule of Four, or Maybe Seven

On SN This Week

A Simple Formula for Survival in Life and Investing

This real-life story dates back to 2014, and it’s about my father.

During summer holidays, we were at our hometown in West Bengal where my father ran his business.

He was generally a healthy person, but for the previous few months he was having slight pain around his left shoulder. The pain was occasional and thus he did not bother to get it checked up. Ours was a very small town, and we were living at its outskirts. The nearest orthopedic doctor was around 20-km away, and so my father did not bother to visit him for a check up once.

One early morning, he woke up with an intense pain in that very shoulder. He took a pain killer, thinking the pain was due to him sleeping on his left side, with his arm pressed under his upper body. The pain reduced a bit, but stayed for a couple of more hours.

Why I Write What I Write?

I received this email from a reader recently-

Boss, I’d prefer to read actionable articles on what stocks you like, and what trends you are seeing in the markets, etc. and not these crappy “how to think and invest better” articles. ~ AJ

And then this slightly more respectable one –

Your posts are like sermons. Please write about your stock picks, your predictions, and how sectors and markets are likely to perform in the future. ~ MK

Chance Has No Memory

“My luck is about to change. The trend will reverse.”

Assume India and Pakistan are playing a one-day international series of 10 matches. Today is the ninth match and the Indian captain Virat Kohli is tossing a fair coin. Pakistan won all the tosses in the previous eight matches. The series is currently tied at 4 – 4.

What is the probability of Kohli winning the toss today?

The answer is –

P (Kohli winning the toss) = No of favorable outcomes / Total no of outcomes = 1 / 2 = 0.5, or 50%

[Read more…] about Chance Has No Memory

The Power of Meditation in Life and Investing

Here are the best things I am reading and thinking about this Saturday morning. But before that, here are the posts I published on the site this week, in case you missed any –