Monday 27 October 2008
MARKET EXAM
Every day and in every trade, the market gives us an examination. The results are unforgiving. Get the examination question correct and the market gives you money. Get the examination question incorrect and the market takes money from you. Every trading decision to buy, or sell, or just observe is a test of all the skills and knowledge and experience you have accumulated. Unlike on-the-job training, the market gives you no latitude for error, for past successes, or experience. Every test is for real, and every test pass or fail carries the same consequences. It is a demanding task. Over ten weeks we give you a less demanding test – at least in terms of consequences. These questions are designed to help you to evaluate your knowledge about trading and help to identify areas where you may needs to do some more homework.
Friday 24 October 2008
Cash is king
Sometimes finding a great investment starts with going through several balance sheets and discovering something. Such type of research is usually very time consuming and intensive, and to be honest not meant for everybody.
Someone who is a doctor or an engineer, might not have so much time to browse through the financial statements of companies. But the rewards that one gets when such companies are found are truly incredible. It is almost like someone mining for gold and striking gold. I spend much more time researching every time markets correct as this is the best time to strike gold. I have discovered a handful of great companies which can do wonders to my portfolio in the coming few years. I’ll share one here with you, in which I have started buying.Let us say there is a candy shop and it has Rs. 4 lying in it’s cash box. Now let us say this entire candy shop has zero debt and the entire business is being sold for Rs. 4.
Would you buy it?
Still thinking what you would do?
Well if I was in your place, I wouldn’t think for a second and would immediately buy it for Rs. 4 before anybody else gets it. Because all I need to do is put Rs. 4 to buy the business and take my Rs. 4 from the cash box back, and the entire business is mine for free.
I’m sure most of you might be thinking which fool would sell their business for just Rs. 4 even though they have Rs. 4 cash with them. Well in the real world nobody would do it, but stock markets are irrational and no wonder we can actually find people doing such things. In fact we have a candy shop that has reserves more than Rs. 11,000 crores being sold for just around Rs. 4,000 crores . This isn’t even considering other fixed assets or net current assets.
Especially with the recent correction and global sentiment of doom and depression, people seem to forget that things change very fast. The very people who were buying the same companies 7-8 times the price until six months ago, today aren’t even looking at them. This is great news for all those who want to buy and create wealth.
Now this company which I have started buying into not only assets and cash much more than its market cap, and not only does it have a book value which is almost three times its current share price. It also has zero debt – which means it doesn’t have any interest burden. In times like now cash is king, queen, prince, everything!
Whenever I discover such companies and look at their balance sheets, it brings a big smile on my face and gets me extremely excited. I know most normal people don’t get excited looking at balance sheets and seeing the cash and book value. But then as I always say people who create wealth do things that others don’t. Being friendly with financial statements and understanding business is very important to succeed as an investor.
A part of me wants to jump in and buy as much as I can with whatever money I have, as such opportunities don’t come everyday. But of course experience (losses in the past due to over exposure) have taught me to never do that and to always buy gradually and never ever allocate all your funds to a single stock, because most probably than not after you buy it, there are chances of it going down.
However I feel that every investor should study this company and see how assets truly get mis-priced. A regular investor can buy these assets at much cheaper prices than even what big Mutual Funds and FIIs have bought it at. Anybody who calls himself an investor and hasn’t noticed or studied this company yet, will probably read about it three to four years down the line and how it was a great investment picked up by a few during the stock market crash of 2008.
Study history and it has always been this way. At the moment the stock might be ignored and down in the dumps, but one of these days it is going to have every Tarun, Dinesh and Harjeet running after it. That day will be the time for me to start thinking about selling it and making a nice hefty profit.As in the past I’m going to share this company with you. However I feel more than from just an investment angle please look at it from an educational angle.
Happy Wealth Creation!
Someone who is a doctor or an engineer, might not have so much time to browse through the financial statements of companies. But the rewards that one gets when such companies are found are truly incredible. It is almost like someone mining for gold and striking gold. I spend much more time researching every time markets correct as this is the best time to strike gold. I have discovered a handful of great companies which can do wonders to my portfolio in the coming few years. I’ll share one here with you, in which I have started buying.Let us say there is a candy shop and it has Rs. 4 lying in it’s cash box. Now let us say this entire candy shop has zero debt and the entire business is being sold for Rs. 4.
Would you buy it?
Still thinking what you would do?
Well if I was in your place, I wouldn’t think for a second and would immediately buy it for Rs. 4 before anybody else gets it. Because all I need to do is put Rs. 4 to buy the business and take my Rs. 4 from the cash box back, and the entire business is mine for free.
I’m sure most of you might be thinking which fool would sell their business for just Rs. 4 even though they have Rs. 4 cash with them. Well in the real world nobody would do it, but stock markets are irrational and no wonder we can actually find people doing such things. In fact we have a candy shop that has reserves more than Rs. 11,000 crores being sold for just around Rs. 4,000 crores . This isn’t even considering other fixed assets or net current assets.
Especially with the recent correction and global sentiment of doom and depression, people seem to forget that things change very fast. The very people who were buying the same companies 7-8 times the price until six months ago, today aren’t even looking at them. This is great news for all those who want to buy and create wealth.
Now this company which I have started buying into not only assets and cash much more than its market cap, and not only does it have a book value which is almost three times its current share price. It also has zero debt – which means it doesn’t have any interest burden. In times like now cash is king, queen, prince, everything!
Whenever I discover such companies and look at their balance sheets, it brings a big smile on my face and gets me extremely excited. I know most normal people don’t get excited looking at balance sheets and seeing the cash and book value. But then as I always say people who create wealth do things that others don’t. Being friendly with financial statements and understanding business is very important to succeed as an investor.
A part of me wants to jump in and buy as much as I can with whatever money I have, as such opportunities don’t come everyday. But of course experience (losses in the past due to over exposure) have taught me to never do that and to always buy gradually and never ever allocate all your funds to a single stock, because most probably than not after you buy it, there are chances of it going down.
However I feel that every investor should study this company and see how assets truly get mis-priced. A regular investor can buy these assets at much cheaper prices than even what big Mutual Funds and FIIs have bought it at. Anybody who calls himself an investor and hasn’t noticed or studied this company yet, will probably read about it three to four years down the line and how it was a great investment picked up by a few during the stock market crash of 2008.
Study history and it has always been this way. At the moment the stock might be ignored and down in the dumps, but one of these days it is going to have every Tarun, Dinesh and Harjeet running after it. That day will be the time for me to start thinking about selling it and making a nice hefty profit.As in the past I’m going to share this company with you. However I feel more than from just an investment angle please look at it from an educational angle.
Happy Wealth Creation!
Saturday 18 October 2008
Sensex breaches 10K, no bottom in sight
It was an absolutely dismal close to this week. The worse nightmare is in, we are in four digits now for the Sensex, the psychological level of 10,000 has been broken for the first time since July 2006 marking a new low for 2008, a multi year low actually and even the Nifty has plunged below its leaning support level of 3,100. So whichever way you look at it, the lows are not holding, fresh lows have happened this week and psychologically important levels have got broken up. 10,000 may just be a level but it makes a lot of difference to see the Sensex at four digits after seeing it at 21,000 just a few months back. So, this bear market is in full flow right now. There are no signs of a bottom yet and we are crumbling with every passing day.
We had a big sell off on Friday and that was led by the power sector with stocks like NTPC, Reliance Infra, Suzlon, Siemens, BHEL, L&T all of them are breaking down. ICICI Bank took a huge knock, Unitech and DLF continue their bottom less fall and other largecap names like Reliance have got hammered up with not too many places to hide, the breadth on Friday has also been quite bad as well.
We had a big sell off on Friday and that was led by the power sector with stocks like NTPC, Reliance Infra, Suzlon, Siemens, BHEL, L&T all of them are breaking down. ICICI Bank took a huge knock, Unitech and DLF continue their bottom less fall and other largecap names like Reliance have got hammered up with not too many places to hide, the breadth on Friday has also been quite bad as well.
How to Win Friends and Influence People- Dale Carnegie
Part one
Fundamental Techniques in Handling People
1)Don't criticize, condemn or complain.
2)Give honest and sincere appreciation.
3)Arouse in the other person an eager want.
Part Two
Six ways to make people like you
1)Become genuinely interested in other people.
Smile.
2)Remember that a person's name is to that person the sweetest and most important sound in any language.
3)Be a good listener. Encourage others to talk about themselves.
Talk in terms of the other person's interests.
4)Make the other person feel important - and do it sincerely.
Part Three
Win people to your way of thinking
1)The only way to get the best of an argument is to avoid it.
2)Show respect for the other person's opinions. Never say, "You're wrong."
3)If you are wrong, admit it quickly and emphatically.
4)Begin in a friendly way.
5)Get the other person saying "yes, yes" immediately.
6)Let the other person do a great deal of the talking.
7)Let the other person feel that the idea is his or hers.
8)Try honestly to see things from the other person's point of view.
9)Be sympathetic with the other person's ideas and desires.
10)Appeal to the nobler motives.
11)Dramatize your ideas.
12)Throw down a challenge.
Part Four
Be a Leader: How to Change People Without Giving Offense or Arousing Resentment
A leader's job often includes changing your people's attitudes and behavior. Some suggestions to accomplish this:
1)Begin with praise and honest appreciation.
2)Call attention to people's mistakes indirectly.
3)Talk about your own mistakes before criticizing the other person.
4)Ask questions instead of giving direct orders.
5)Let the other person save face.
6)Praise the slightest improvement and praise every improvement. Be "hearty in your
7)approbation and lavish in your praise."
8)Give the other person a fine reputation to live up to.
9)Use encouragement. Make the fault seem easy to correct.
10)Make the other person happy about doing the thing you suggest.
Fundamental Techniques in Handling People
1)Don't criticize, condemn or complain.
2)Give honest and sincere appreciation.
3)Arouse in the other person an eager want.
Part Two
Six ways to make people like you
1)Become genuinely interested in other people.
Smile.
2)Remember that a person's name is to that person the sweetest and most important sound in any language.
3)Be a good listener. Encourage others to talk about themselves.
Talk in terms of the other person's interests.
4)Make the other person feel important - and do it sincerely.
Part Three
Win people to your way of thinking
1)The only way to get the best of an argument is to avoid it.
2)Show respect for the other person's opinions. Never say, "You're wrong."
3)If you are wrong, admit it quickly and emphatically.
4)Begin in a friendly way.
5)Get the other person saying "yes, yes" immediately.
6)Let the other person do a great deal of the talking.
7)Let the other person feel that the idea is his or hers.
8)Try honestly to see things from the other person's point of view.
9)Be sympathetic with the other person's ideas and desires.
10)Appeal to the nobler motives.
11)Dramatize your ideas.
12)Throw down a challenge.
Part Four
Be a Leader: How to Change People Without Giving Offense or Arousing Resentment
A leader's job often includes changing your people's attitudes and behavior. Some suggestions to accomplish this:
1)Begin with praise and honest appreciation.
2)Call attention to people's mistakes indirectly.
3)Talk about your own mistakes before criticizing the other person.
4)Ask questions instead of giving direct orders.
5)Let the other person save face.
6)Praise the slightest improvement and praise every improvement. Be "hearty in your
7)approbation and lavish in your praise."
8)Give the other person a fine reputation to live up to.
9)Use encouragement. Make the fault seem easy to correct.
10)Make the other person happy about doing the thing you suggest.
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