Friday, June 10, 2011

A Random Walk Down Wall Street - Burton Malkiel

Highly recommended reading of first three chapters, Firm Foundations and Castles in the air, Madness of the Crowds, Stock Valuations from Sixties through Nineties. Can save you a lot of money in life.

While a value investor may never subscribe to dart throwing monkey business or indexing approach in latter half of the book, above chapters are, in my opinion, well packed.

While you may have come across mania and fixation of crowds such as Tulip Mania in Holland, Florida real estate craze wherein 1/3rd of population turned to real estate profession, South sea bubble, Conglomerate boom, Nifty Fifty madness, Biotech, Internet, Real Estate, you'd hope that at least similar mania would no rerun. Real estate is a recurring theme. You'd believe that a decade long depression after Tulip idée fixe that caused severe damage to Dutch economy, fact that people would exchange their house, factory, farm in exchange for a single flower and subsequent aftermath would not erase from the memory of world. Not quite so. Our memories are really short lived more so as a crowd. As Gustave Le Bon noted that in crowds it stupidity and not mother wit that is accumulated. China fell for the same trap with Lycoris Plant as recent as 1980s.Value of a small plant went as high as 300 years annual salary, of course there had to be a wake up when half the city grew Lycoris. They seem to be drunk on a cocktail made from Lethe. (http://en.wikipedia.org/wiki/Lethe)

You'll be amazed to know of a fact in next statement. Given that United States economy has always been bigger than Japanese, at least in 20th century. In terms of acreage USA is 26 times the size of Japan. Population wise its been twice the size. In 1990 value of real estate in Tokyo alone exceeded that of whole United States or about 20% of global wealth. Japan could have sold Tokyo in exchange of all United States. 27 year Nikkie graph below illustrates that every market including dalal-street can lay an egg and financial laws of gravity know no boundaries of race or region.

Japanese have been paying for over two decades

Wednesday, June 8, 2011

A FILA related news

I mentioned few months back that FILA are trying to revive their Golf business after over endorsement blunders, at the same time trying to enter kids wear, inner wear

http://www.fila.co.kr/2010/filaintimo/intimo.html

http://www.fila.co.kr/2010/filakids/kids.html

http://www.filasport.co.kr/2010WINTER/

Came across a recent news that FILA Korea have bought along with a PE player a leading Golf company, Acushnet for 1.2 Billion US$, which has an equivalent annual revenues. It is arguably the most profitable golf equipment company in the world. They make the leading brand of golf balls, clubs, gloves, accessories. News here

http://www.southcoasttoday.com/apps/pbcs.dll/article?AID=/20110531/NEBULLETIN/106010351

and

http://online.wsj.com/article/BT-CO-20110520-706961.html

 Achushnet (http://www.acushnetcompany.com) owns all these great brands:


https://www.acushnetgolf.com

http://www.titleist.com

http://www.footjoy.com

http://www.pinnaclegolf.com

http://www.vokey.com

http://www.scottycameron.com

http://www.fittingworks.com

http://www.mytpi.com

It is implied that FILA Korea and its partners will run the business. Cravatex may benefit but it is not confirmed. Fila Korea is keen to market the gear in Asia as per the statement by them, "With our extensive knowledge and reach in Asia, we believe that the Acushnet brands have incredible new opportunity for growth in the emerging markets in Asia."

http://www.filagolf.com

Sunday, June 5, 2011

Investing Quotes

“An investment in knowledge always pays the best interest” - Benjamin Franklin

“There is no finer investment for any community than putting milk into babies.” - Winston Churchill

“Models work when they are appropriate for the particular circumstance, but some of the best investment judgments over time have come when people recognized that models derived in other periods were broken or not directly relevant.”  - Abbey Joseph Cohen

Great Idea + Great Manager + Great Price = Great Investment Results

Own not the most, but the best.

The definition of a great company is one that will remain great for many, many years.

Focus on return on equity, not on earning per share.

The secret of long-term investment success is benign neglect. Don’t try too hard. Much success can be attributed in inactivity.

An investor’s worst enemy is not the stock market but his own emotions.

The safe way to double your money is to fold it over once and put it in your pocket.  -Frank Hubbard

When buying shares, ask yourself, would you buy the whole company?

Every day I get up and look through the Forbes list of the richest people in America.  If I'm not there, I go to work.  -Robert Orben

If inflation continues to soar, you're going to have to work like a dog just to live like one.  -George Gobel

One way to end up with $1 million is to start with $2 million and use technical analysis.  ~Ralph Seger

Inflation hasn't ruined everything.  A dime can still be used as a screwdriver. 


The market does not beat them.  They beat themselves, because though they have brains they cannot sit tight.  -Jesse Livermore

Do not value money for any more nor any less than its worth; it is a good servant but a bad master.


Friday, June 3, 2011

Intec Capital - 2

Intec has hired frantically between Jan - March and recruited 30 employees, fresh B school grads or those in early career. Recent pace has slowed down but still strong for a micro cap company. Click on this link and tell me which vacancy do you like most and why as an investor ?

It renders as below as on 3rd of June 2011



Thursday, June 2, 2011

Investing Mistakes

Some statements I find hilarious from stock market investors, hopefuls, greenhorns and sharks aka Investment Professionals alike - no insult intended :) - its a fact

- "Maybe you can invest 3,000 Rs in this stock, all you can lose is little but gains can be manifold"

Do you mean 1% of your portfolio or 0.1% of your portfolio ? that way you may need to buy 100-500 stocks. I don't about you but I don't have billions, so I find investing less than 5% of portfolio meaningless.

- "I bought this stock for a ten bagger, therefore I will be very disappointed if it only becomes a five bagger in next 4-5 years"

Why did you buy any other growth stock or equity instrument growing at 10% or with expectations of a two bagger in five years ? Isn't opportunity cost too high given a certain 4-5 bagger in hand.

- "Industry has very bright future, therefore this company must do well"

Well I have yet to see a stock in India do well in solar energy or alternative fuel, remember XL Telecom or Asian Electronics ? Crowd is almost always late. With a few exceptions like Praj.

- "This stock is high risk high return".

Apparently even university educated "professionals" / "experts" write this statement in research report. Nobody made money by "high risk high return" stocks on consistent basis.

- Not investing soon enough in life.

Even I made that mistake in life by investing later than I could in equity instruments. Long term compounding is a great power.

- Not knowing the basics

Investing without adequate knowledge. Asking others for tips. Nifty that can be bought for a very minimal commission as a benchmark will beat the aggregate of Mutual Funds, your money in a Mutual Fund is financing the salaries and office buildings of fund managers.

- Chasing past performance of Mutual Funds

Can never say enough on the topic. Knowing a bit about how the world works I neither feel safe to part my money to mutual fund nor inserting a coin in a vending machine (always a risk of power failure / fault in delivery) as opposed to dealing with living person; unless you go round the whole building or neighbourhood looking for a vending machine with stuck snack, so it drops twosome for you ;-). You can call me value hunter.


- Ignoring diversification altogether or over diversification.

There is no cant-miss-stock in this Universe, atleast I have not come across it, therefore no stock deserves 100% portfolio allocation. If you area a billionaire or trader and have too much time at disposal, march ahead with 500 stock portfolio. I figure index and a sleepy investor would outperform your hard work.

- Having un realistic expectations

50%+ compounding per annum ? Get real, wake up. It may be possible in some years. Snap out of it.

- Holding too long or too short

Difficult and case specific. Have to be in the game long enough to know how long to hold. But not long after you found something 2X better.

-Too much faith in your stocks

Have you noticed the bias that kicks in in owned stocks ? Look for counter argument at all times, not confirming evidence, what can go awry, worst case scenario.