Blog on Value Investing | Safal Niveshak

Introducing: The DCF Calculator

First things first. I had a wonderful workshop in Pune last Sunday. And here are the amazing tribe members who attended it…

Safal Niveshak Value Investing Workshop - Pune 2015

My upcoming Workshops would be in Chennai, Delhi, and Mumbai, and you will get an update on the same soon.

Anyways, let me now focus on today’s topic. Ever since I shared my stock analysis excel a couple of years back, I have received innumerable questions from people who’ve found it difficult to handle the excel. 🙂

If you have been facing a similar problem, don’t worry, because I’m working on a few simple online calculators – like the one on DCF or discounted cash flow method below – that can help you analyze the financials of businesses and also value them.

Now, before you praise me for my tech skills which I don’t have, let me share that this calculator has been developed by my good friend and tribe member Anshul Khare, who is also working with me on other such calculators. Thanks Anshul!

Before you work on the calculator below, read this post I did on how to value stocks using DCF to understand the basics of sensible DCF usage, and how to avoid its misuse.

How to Master Analyzing the Cash Flow Statement

A wise man once said, “If your outgo exceeds your inflow, then your upkeep will be your downfall.”

That says a lot about the importance of cash flow in a person’s life. In fact, if your cash flow is healthy, it will cover a lot of sins. 🙂

A company is no different. You will find businesses that generate a lot of cash flows, even when they may not be earning profits.

I have a friend who runs a company that did not make profit for five years in a row. But my friend never missed his yearly trip to the US, and he bought a high end car every two years. His employees were also paid well.

You may wonder, “But how he did it?”

The answer is – Great cash flow.

Safal Niveshak’s Investing Classroom: Demystifying Return on Equity

I am not writing much today, but just sharing a video I’ve created to demystify the very important concept of Return on Equity or ROE.

For starters, ROE measures the return earned by a company on its equity capital, or the capital that belongs to equity shareholders of the company, which includes part of profit that the company retains every year after paying dividends.

A business that earns a high ROE is more likely to be one that is capable of generating cash internally and thus has lesser or no need of external capital (debt) to grow its operations.

There’s a lot of stuff that can be written on this subject, but here is the video that goes a bit beyond the basics…

Click here if you can’t see the video above.

Let me know your feedback on the video in the Comments section of this post. That will help me assess whether I should prepare similar videos in the future, or just settle with writing my wordy posts. 🙂

Safal Niveshak’s Book Giveaway 2015 – Results

I recently started a Book Giveaway on Safal Niveshak. The idea was to give away 15 of my best read books on investing and human behaviour.

Around 4,350 people participated in the Giveaway, including a few fake ones like – humma.humma, angoor.khatte, jumma.chumma, naach.basanti, chhota.bheem, tyre.puncture, and junglee.haathi. 😉 Some people would just try to rig the system to win at any cost!

Anyways, here are the 3 winners of the Giveaway, chosen based on the points they had accumulated by sharing the Giveaway and spreading the word about Safal Niveshak…

Ravi Kiran
Atul Kekan
Sanjay Surana

Congratulations to the winners!

Finally, here is the list of 15 remarkable books I am giving away –

Liar’s Poker by Michael Lewis
The Checklist Manifesto by Atul Gawande
Extraordinary Popular Delusions and the Madness of Crowds by Charles Mackay
Irrational Exuberance by Robert J. Shiller
When Genius Failed: The Rise and Fall of Long-Term Capital Management by Roger Lowenstein
Think and Grow Rich by Napoleon Hill
Predictably Irrational: The Hidden Forces that Shape Our Decisions by Dan Ariely
Influence: The Psychology of Persuasion by Cialdini Robert B.
The Money Game by Adam Smith
The Art of Thinking Clearly by Rolf Dobelli
Thinking, Fast and Slow by Daniel Kahneman
Fooled by Randomness by Nassim Nicholas Taleb
The Richest Man in Babylon by George S. Clason
Buffett: The Making of an American Capitalist by Roger Lowenstein
Against the Gods: The Remarkable Story of Risk by Peter L. Bernstein

Even if you haven’t won the contest, you’ll do yourself a world of good by buying/borrowing and reading all of these books.

By the way, given the tough competition for the first three prizes, I am happy to award special prizes to the next five people on the list. 🙂

These special winners are –

Arpit Lahoty
Versha M
Murtaza
Akhilesh Pathak
Vicky Rathod

And the special prize here is an exclusive, Safal Niveshak’s Embroidered Polo Shirt. 🙂

Congratulations to all the winners, and thanks to everyone who participated in the Giveaway!

Happy reading!

Investing and Law of the Farm

Centuries ago, a Chinese King was sitting in his cabinet meeting discussing about the poor economy of his country. One economist said, “Sir, we can’t do anything about it. It’s the Law of Supply and Demand.”

The King said, “I’m the King. I will repeal that Law!” The Cabinet kept quiet, but one brave soul said, “Sir, you cannot repeal the Law of Supply and Demand. It’s like the Law of Gravity.”

And the King said, “I’m the King. I will also repeal the Law of Gravity!”

Obviously, this story is purely fictional. But the message that comes out is clear – You cannot repeal some laws that govern this universe.

Like the Law of Gravity, and…

The Investor’s Manifesto

Read it. Print it. Frame it. Face it. Remember it. Do it.

This is for you. This is from someone like you.

It is Safal Niveshak’s The Investor’s Manifesto.

It is something you can reflect back on if you ever felt stuck in your investing life.

If you believe in it, follow it, and stand for it, your investing life will be good. In fact, very good.

Here is the third copy of the Manifesto that adorns my wall, and the first copy that I gifted to Prof. Sanjay Bakshi (the second copy went to Mr. Mohnish Pabrai)…

Read it. Print it. Frame it. Face it. Remember it. Do it.

This is YOUR Manifesto.

Poke the Box: Avoid Arrogance. You May Have Just Had a Beginner’s Luck

Let’s Start with Safal Niveshak
Just in case you missed any of this on Safal Niveshak over the last few days and weeks…

I’m organizing my next Value Investing Workshop in Pune on 1st Feb. 2015. Register here if you wish to join.
I recently wrote about the Butterfly Effect and the huge impact it has created in my financial life. You may find some value in my experiences.
Dev of Stable Investor recently interviewed me for his website. You can read the complete interview here.

The Hidden Force that Won Me Financial Freedom

Imagine that you get up late one day and make it to the bus stop 15 minutes later than normal. But while waiting for the bus, you meet your future spouse with whom you are going to live a beautiful life. This happened just because you woke up late one day. An event that seemed insignificant at that time had a significant impact on your life.

Now imagine another situation. You work in a small company where you are mistreated by your boss. After months of being disrespected, you start to hate your job and decide to quit.

Before you quit, you speak about your experience with other employees and the result is that three other people decide to quit too. When these people find themselves unemployed, they decide to start their own business. After some time and a lot of hard work, their business becomes successful to the extent that they start competing with the company they used to work for. Under pressure of fierce competition, the old company declares bankruptcy. In a way, it all started with you quitting your job.

These two situations seem exceptional but that is what happens to a lot of people a lot of times – a small, hidden force causes a big effect in their lives.

Safal Niveshak’s Book Giveaway 2015 – Win 15 Free Books!

If you are to listen to Warren Buffett and Charlie Munger, or any smart people around, they’d tell you that the best way to get smarter is to read a lot.

Warren Buffett says, “I just sit in my office and read all day.”

Charlie Munger says, “We read a lot. I don’t know anyone who’s wise who doesn’t read a lot.”

“But which books should I read?” ask a lot of tribe members.

Here’s a solution I propose, and something that would surely interest you.

I’ve picked out 15 of the best books I’ve ever read on investing, human behaviour, and related subjects. I want you to have them. All 15 of them, worth Rs 7,500 or even more. I will pay for them.

I can’t give all 15 books to all the people who read this, but I am looking to give them to 3 people through Safal Niveshak’s Book Giveaway 2015. See the bottom of this post for more details.

The Best of Safal Niveshak 2014

Together we learned quite a bit in 2014 (at least I did). 🙂

Through my investing workshops across 14 cities (the most in any year so far), I also met 300+ tribe members, which was in itself a great personal learning experience.

Finally, I rounded off the year meeting the legendary investor Mohnish Pabrai and Prof. Sanjay Bakshi.

Meeting with Mohnish Pabrai and Sanjay Bakshi

As far as the website is concerned, the number of visitors increased by about 56% during the year and the number of pages viewed crossed 1 million for the first time (up 42% over 2013).

I wrote around 125 posts during the year. Here is a chance for you to catch up on something you might have missed. These are some of the best posts from the year, based on the number of views and comments.

1. Value Investing, the Sanjay Bakshi Way 2.0 – My second interview of Prof. Bakshi was as big a hit as the first one in 2012. In this one, he talked about the important concepts of economic moats, valuations, mental models, diversification, checklists, and why you must buy great businesses for the long term. Overall, a terrific read!

2. Simple Ideas on Wealth Creation, the Subramoney Way – Subra, as he’s popularly known, believes that to make money, you do not need too many ideas. You need simple ideas and discipline. Simple ideas, and many of them, are what he shared in this interview for Safal Niveshak, which was the second most read series here this year.

3. Interview with Basant Maheshwari – In this no holds barred interview, Basant talked about his upbringing as an investor, what he learned along the way, and his process of identifying great businesses. A nice read, especially for a new investor.

4. 36 Lessons from 36 Years of My Life – As I completed thirty-six years in this life, I shared a handful of lessons I’ve learned — lessons on life, work, family, health, and money – which may serve as a helpful guide for those just starting out. Though I was not sure this would be of much interest to readers, but it ended up as one of the most read and commented posts on the site this year.

5. 5 Lessons on Life & Investing from Guy Spier’s Education of a Value Investor – If I had not read Guy Spier’s The Education of a Value Investor, and someone told me his story, I would have believed it was mine. In this post, I shared the five meaningful thoughts (among many) that Guy has written about in his book, which I believe serve a great learning for most people aspiring to find a greater meaning in life and become better as value investors. I recommend you read Guy’s book, if you haven’t done already.

6. How I Multiplied My Income 2.5x, Savings 5x, and Happiness 20x (After Quitting My Job) – The title of this post conveys a lot, I believe. This one came straight from my heart, and thus one of my personal favourites.

7. The Happiest Man I’ve Ever Met – In this post, I profiled a man of very modest means but among the happiest people I’ve ever met in my life. You’ll be happy reading this post.

8. 10 Investing Gems from Peter Lynch’s One Up on Wall Street – This brilliant book offers great insight into the mind of one of the greatest money managers of all times. In this post, I shared just ten of them. Anyone thinking about buying individual stocks must read Lynch’s book before they ever make their first stock purchase. This post can be a start.

9. Confessions of a Stock Market Analyst – This post was originally written in June 2012, but I re-posted it this year and it again turned out to be among the most popular on the blog.

10. Can You Sum Up Your Investing Philosophy in 10 Words? – I asked tribe members to sum up their investing philosophies in 10 words or less, and was positively surprised at the amazing responses. If you haven’t shared your investment philosophy, you can do it right away.

I have a lot more coming in 2015. 🙂

Happy New Year, and be safe!