Interim Update

The republic day is upon us so let us work towards freeing ourselves of all debt. Once economic freedom is there we can all follow our dreams. With this free time on our hands and spare cash to boot some of us will also work towards making India a better place to live in.
I take this opportune moment to explain the limited knowledge that I have of Value investing.
What most people do is speculate and not really invest. Investment should be only done when you find “value”. It applies for all types of investments be it commodities, real estate or equities. You can say that when you get Re 1 for the price of 80 paisa, there is value. On top of this if you can find a margin of safety of 30 paisa more, now that is real value! The wider the difference between the true value (Re 1) and the current market price , the wider is the moat (WB's words)! You do not buy gold at 14K or a 2BHK in the suburbs for 1 Cr or the Sensex at 21K. All this is called speculation, expecting to find a bigger fool to bail you out. As this site is dedicated to equities I will explain a little more in detail on equities. Graham’s book the intelligent investor needs to be read to under the concept in totality. I personally look the following parameters to find out a good company to buy.
1) Low P/E
2) High Cash/Book and low debt
3) Steady growth in EPS
4) Good management
5) Competitive advantage

These parameters need to researched much in advance and should be tracked regularly of the 10-15 companies that you wish to buy (or all listed companies as Buffet does!). Once the data is collected wait for markets to give you the opportunity to buy the Re 1 company at 50 paisa. The current market condition is one of those situations when there is blood on the streets and even 10 year old investments may be at 0% profit. There is plenty of value. Many of us are afraid to invest. The fear is always of the unknown. Do your research and understand the companies and you WILL have the conviction and the confidence to invest.
Six months back I had started a dummy portfolio and promised not to change the companies it. It is a general portfolio. I will start another portfolio with just 4 companies and the same amount of investment. Here the difference will be that the companies I pick up should have real value. Over the next 6 months let us see if these companies to better than the randomly selected companies.

Note – Do Not invest without doing your own research.

6 Month Update

A brand new year is here. It’s better to start a year on a low key so than at least by the year ends with a flourish! The December month seemed to be bringing a close to the Apathy period and people had started at least looking at their portfolios. It almost seemed the markets might even quietly run away and not give any opportunity to the fence sitters who had not invested in Oct and Nov. And then the “Satya” came out of Satyam.
All said and done we all have lots to thank Mr. Raju for.
1)It has finally confirmed our belief that governance was never the strong point of many Indian companies
2)It has shaken quite a few companies who innovate when declaring results
3)This time’s quarterly results might be the most accurate EVER and people will desist from painting a rosy picture even when the whole industry is down.
4)Regulators and audit firms will pull up their socks and investors have become more vigilant
5)If none of the above happen in “chalta hai” India , at least the markets are back to reasonable levels where blue chips can be bought

The news channels will keep on showing only news on Satyam and scaring people like you and me but this whole saga will be soon be swept away by the next “breaking news”!
In this all hoopla let’s not forget to look for Value. Many good companies are still available at good valuations and might be for the next 2-3 months. The day the FIIs decide to pump in money the same companies will be over priced within a week or two. Personally I think markets will slowly go down a little further (around 9000 on Sensex) and then take a U turn.
Over all the whole year might not give great returns but if good companies are bought at a correct price you can still get a 30-40% returns as the credit condition improves. With inflation ,oil and interest rates coming down there is more upside than downside left in the market.

Sagas such as the current one shows us why great investors like Mr. Buffet check our the data of more than 10 years of a company before investing in it.

So be at it and keep investing small amounts whenever some great company looks cheap so that in 3-5 years time you are not cursing yourself that you did not invest in 2009.

My sample portfolio is still underperforming the nifty by 8%.

Happy Investing in 2009

Happy New Year to all.
This space will be used primarily as a commentary on the Indian Stock Markets. On the 9th of each month an update of the current market scenario will be posted. This monthy update will also have the update of a virtual portfolio of Rupees 1 Cr which was invested in 15 companies in July 2008. This site is meant for any person who is interested in Value Investing.
It is safe to assume that i have vested interests in all stocks that i comment on.

Atnamus.