Blog on Value Investing | Safal Niveshak

Safal Niveshak StockTalk #11: Tata Investment Corp. Ltd.

Disclaimer: The opinions in this report are for “informational and educational” purposes only and should not be construed as a recommendation to buy or sell the stock(s) mentioned. I do not recommend that you act upon any investment information without first doing an independent research as to the suitability of such investment for your specific situation.

Welcome to the eleventh issue of Safal Niveshak StockTalk.

After covering Cera Sanitaryware last time, this time I’ve researched on Tata Investment Corp. Ltd. (TICL), a non-banking finance company (NBFC) involved in the business of investing in equity shares and equity-related securities (it’s like a quasi-mutual fund, except that it does not invest investors’ money, but its own).

Anyways, before we dive deeper into TICL, here is a brief overview of the sections of this report.

About TICL
Safal Niveshak’s 20-Point Checklist
Intrinsic Value Assumptions
Risk Statement
Financial & Market Snapshot

Has the Govt. Laid Ground for the Next Big Bull Run?

Today’s post is written by Sunny Gupta, a long-time Safal Niveshak tribesman from New Delhi.

Sunny posted this originally on the Forum, seeking answers from fellow tribesmen. I thought putting this as a post would bring in a greater amount of discussion.

The points Sunny has raised, plus the questions he has asked, are important points for us as ‘aam aadmi’, and also matter a lot for us as investors.

Over to you, Sunny.

While this may be a complicated topic, and renowned economists would discuss such things, I want to bring it up and see how such events affect us as investors.

The topic is related to policy paralysis of past several months, and the sudden burst of policy actions related to fuel subsidy reduction and FDI allowance in various sectors.

Wit, Wisdom, Warren (Issue #1): Key Investing Principles

Image Source: Rediff

We start this series of review of Warren Buffett’s letters with his second letter to partners of Buffett Partnerships that he wrote in 1957 (the first letter isn’t available).

Buffett was just 27 years of age when he wrote this letter to his partners. So you can imagine his level of understanding at an age when most people are clueless about the future and are instead lost in the world of revelry and merriment.

But Buffett had his priorities well set. By this time, he had already:

Started and closed several small businesses (like selling chewing gum, Coca-Cola, weekly magazines, golf balls and stamps) that could earn him enough money to save and invest.
Bought a farm using his investments.
Accumulated more than US$ 90,000 in savings (measured in 2009 dollars).
Filed his first income tax return…at the age of 14!
Graduated with a Bachelor of Science in Business Administration (1949).
Earned a Master of Science in Economics from Columbia (1951).
Studied “Security Analysis” under Benjamin Graham and David Dodd (and earned the only A-Grade that Graham ever gave to any of his students).
Read Graham’s The Intelligent Investor several times
Worked as a securities analyst under Graham at Graham-Newman Corp. (1954-56).

He started Buffett Partnership Ltd. in 1956 after Graham retired and closed his partnership.

Safal Niveshak StockTalk #10: Cera Sanitaryware

Disclaimer: The opinions in this report are for “informational and educational” purposes only and should not be construed as a recommendation to buy or sell the stock(s) mentioned. I do not recommend that you act upon any investment information without first doing an independent research as to the suitability of such investment for your specific situation.

Welcome to the tenth issue of Safal Niveshak StockTalk. (Read previous issues)

After covering BHEL last time, this time I’ve researched on Cera Sanitaryware Ltd. (CSL), one of India’s leading manufacturers of sanitaryware. Before we dive deeper into CSL, here is a brief overview of the sections of this report.

About CSL
Safal Niveshak’s 20-Point Checklist
Intrinsic Value Assumptions
Risk Statement
Financial & Market Snapshot
“Should I Buy CSL?” Checklist

How to Value Stocks using DCF…and the Dangers of Doing So

Warren Buffett wrote in his 1992 letter to shareholders of Berkshire Hathaway…

In the Theory of Investment Value, written over 50 years ago, John Burr Williams set forth the equation for value, which we condense here: The value of any stock, bond or business today is determined by the cash inflows and outflows – discounted at an appropriate interest rate – that can be expected to occur during the remaining life of the asset.

What Buffett defines here is essentially what we know as the discounted cash flow or DCF, a key method to calculate intrinsic value of companies.

The interesting thing to note here is that no one knows whether Buffett has ever used DCF himself!

Even Buffett’s business partner and alter ego Charlie Munger has occasionally said that he has never seen Buffett doing any DCF calculations.

Wit, Wisdom, Warren: Lessons from the World’s Best Investor

Image Source: Rediff

I have nothing but utmost respect for Warren Buffett, the only man who became the world’s wealthiest by picking stocks.

My fondness for Buffett has its roots in a chance email forwarded by a friend in 2006, which contained link to one of his letters to shareholders. Till then, I had known Buffett as a successful investor, but never bothered to read the philosophy that made him an investing great.

Anyways, as soon as I finished reading this letter my friend sent me, I was hooked! The hook was so strong that I printed every single one of Buffett’s annual letters to shareholders of Berkshire Hathaway (and also his Partnership letters) and read them page by page.

Take Control, Investor!

Okay, this is going to be my smallest post on Safal Niveshak so far. But I hope this will leave you with something to introspect. 🙂

There are five key aspects of investing…

Risk = Not knowing what you are doing
Cost = Broking commission + Financial planning fee + Entry loads + Administration fee + Subscription fee for magazines, stock research + Consultation fee + Taxes
Time = Long term compounding
Emotion = Your behaviour
Return = Future gains/losses

Now…

So it beats me why…

Is this really true of you?

If yes (thanks for being honest!), tell me what you are doing to change this?

If not, hail Mogambo! 🙂

Timeless Resources on Value Investing

When I started my career in 2003, I “confidently” counted myself among the elite few from my MBA college to have made it to the lucrative “equity research” industry (MBA + campus placement + finance job = Overconfidence!)

I thought I had a wonderful chance to bring into practice whatever I’d learnt during my specialization in Finance, and especially things I’d learnt reading the subject of “Security Analysis and Portfolio Management”.

Things looked great till about early 2006, while I was still learning the “tricks” of the trade – the concepts of CAPM, beta, and efficient markets seemed so relevant.

Applying Behavioral Finance to Value Investing

“Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ…Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.” ~ Warren Buffett

We call ourselves rational beings. The truth is that we aren’t rational but rationalising beings.

The brain that sits on the top of your head isn’t a flawless machine. Yes, it is powerful. But it has its weaknesses. In everyday terms, we call such weaknesses as ‘biases’.

The good part is that while we cannot exchange our brains with other people nor can we upgrade it at a hardware shop, we can reduce the number of mistakes that our biases cause by just taking notice of them.

How Will You Measure Your Life?

I recently shared with you the secret mission of Safal Niveshak, which has not much to do with the field of stock market investing.

Then, I also shared the best advice I ever got, which again was relevant not just for my investing pursuits but also for my life.

Today, I’m sharing with you another amazing article I read recently on the subject of “life”.

You might wonder why I’m writing (or covering) so much on the subject of “life” on a platform dedicated to investing.

Well, that’s the entire point of becoming a “Safal Niveshak” – one who is not just successful in investing his financial capital, but also enriches his human capital.