Investing

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Investing Lessons from the ‘Black Hole’ Called Suzlon

Black Hole “What’s in a name? That which we call a rose by any other name would smell as sweet,” wrote Shakespeare in Romeo and Juliet.

You can experience the truth of these words when you come to know that a company whose name was derived from the adage ‘be careful about loan’ or ‘sujh bujh ke loan lena’, is now one of the worst indebted companies in India, and one that has been extremely careless with it borrowing.

I’m talking about the wind energy major Suzlon (sujh+loan) – once a darling of the stock markets and now as worthless as Punam Pandey.

The company’s management, which narrated a promising story to the analysts and investors during the company’s pre-IPO conference in 2005, is now struggling to keep their company above water.

The promoter, Tulsi Tanti, once regarded as the poster-boy of India’s globalization story, is now being blamed for bringing his company and its shareholders down to their knees.
[Read more…] about Investing Lessons from the ‘Black Hole’ Called Suzlon

Your Best Investment for 2012

If I could create the definition of better investing, it would read…

“Educating yourself to become more consciously aware of the immense power of your mind to create the action of earning wealth.”

I believe ‘your mind’ is your greatest asset and investing on the development of the same is more important than investing in any stock or bond out there.

The famous British philosophical writer James Allen wrote in his breakthrough book As A Man Thinketh…

“Man’s mind may be likened to a garden, which may be intelligently cultivated or allowed to run wild; but whether cultivated or neglected, it must, and will, bring forth. If no useful seeds are put into it, then an abundance of useless weed-seeds will fall therein, and will continue to produce their kind.”

As A Man Thinketh is a small book that explains how the human mind can create its environment and circumstances.

The author believes that the root cause of prosperity and poverty is how a person thinks.
[Read more…] about Your Best Investment for 2012

I Wish Someone Had Taught Me About ‘Present Value’ This Way

If the concepts of finance were to be listed down in order of their importance, the concept of ‘Present Value’ will be at the top of that list.

In simple words, present value describes the process of determining what a cash flow to be received in the future is worth in today’s rupees.

In simpler words, it is the value today of an amount of money in the future.

“I’m still not getting it!” you might say.

“How do you calculate present value?”

“What’s the relevance of present value in investing?”

Well, if these are some questions that crop up in your mind as soon as I use the term present value, and before you junk it as some ‘difficult to understand’ concept that you must not worry about, just check out this small video.
[Read more…] about I Wish Someone Had Taught Me About ‘Present Value’ This Way

What’s the Point of Saving and Investing?

“Nice to meet you. Just hold on for a second. I need to send an SMS to my husband.”

My cousin and I stood there waiting. The girl, a manager with a private sector bank, busily tapped out a text message on her new iPhone.

She was pretty slow with the typing, but we knew what was going on.

She was just showing off her new Rs 30,000 iPhone – hot stuff for Alwar, a small town in Rajasthan where I grew up and which has a relatively middle class population.

We had seen her arrive to the bank with her husband who drove a shiny black and modified SUV.

She and her husband were young… probably in their early thirties. As I came to know from her, he was a real estate broker in the town. Even though their income must be down in a weak housing and job market, their spending didn’t reflect the crisis.

“What’s going on here?” I asked my cousin who was a local.
[Read more…] about What’s the Point of Saving and Investing?

Safal Niveshak StockTalk #1: Larsen & Toubro

Welcome to the first issue of the Safal Niveshak StockTalk. (Download PDF Report)

Based on requests, we start with the analysis on L&T, which is India’s largest engineering company, and one that has business spread across a wide domain in the engineering, capital goods, and construction spaces.

Since this is the first issue of the Safal Niveshak StockTalk, I expect to receive feedback from you on the quality of the analysis and reporting plus your suggestion for improving the analysis further.

I won’t say this report would perfectly capture the entire business and performance of L&T. But I’ve tried to be as comprehensive as possible while maintaining the simplicity of analysis that Safal Niveshak stands for.
[Read more…] about Safal Niveshak StockTalk #1: Larsen & Toubro

Now is the time to PANIC

Here is how the Indian stock markets have behaved over the past four months.

I’ll skip the reasons for the same as you must have heard it somewhere (or everywhere).

To say the past few months have been dreadful for investors is an understatement.

But it is times like these that test your conviction in your stock picks or whether you want to sell it off and run for the hills.
[Read more…] about Now is the time to PANIC

Does Monetary Policy Really Impact Stock Prices?

RBI's Monetary Policy One event that catches attention of the investor community every three months is the monetary policy that is announced by the Indian central bank, the RBI…

…like it did today when the RBI announced its quarterly review for the monetary policy for 2011-12.

Every move the RBI makes, even if it is irrelevant to the long term performance of the Indian economy or financial markets, is dissected and discussed threadbare.

Leave the RBI Governor aside, expert opinions flood the newswires from brokers, analysts, and fund managers. Even the Finance Minister shares the limelight in giving his opinion on the RBI’s policy.

Amidst all this, the RBI Governor is either made a hero or a villain, depending on how well he’s taken care of the market’s expectations.

Now the question is – why is monetary policy such a widely followed event in the investor community? What impact does it have on stock prices?

Let’s try to answer these questions.
[Read more…] about Does Monetary Policy Really Impact Stock Prices?

Intrinsic Value: The Holy Grail of Value Investing

“You should always buy the stock of a good company.” In isolation, this seems a very valid statement.

But look at this – “You should always buy the stock of a good company, whatever the price.”

Now, this is a highly dangerous advice to give to someone.

A great company can translate into a great investment. But all great companies do not translate into great investments.

Confused? Well let me clarify.

There is a business behind a company. And there is a great business behind a great company – one that has all the ingredients of success, enjoys pricing power, generates a lot of free cash flow, is not much troubled by competition, and has a very good management team at helm.

So this business has a great value. But it will make a great investment only if it is bought at a reasonable price.

“But how do you know what is a reasonable price?” you may ask.
[Read more…] about Intrinsic Value: The Holy Grail of Value Investing

My First Stock Market Loss…and the Lesson I Learnt

The reason that pain hurts is because it should.

Pain is nature’s way of telling us to get out of harm’s way. Like fever tells us that something’s not right inside of us and that we must take the necessary medication to avoid doing a greater harm to our body.

This is also true when it comes to investing in stock markets. When the market moves and I’m losing money, I know it hurts.

But more often than not, unlike in life, I would continue to bear that pain (keep holding my losing stocks) instead of taking the medication (cutting the losses) to avoid a greater harm in the future.

No one is right all the time and I don’t have to be.

But this wasn’t something I believed a few years back, till the time I took my first major loss in a leading textile stock.
[Read more…] about My First Stock Market Loss…and the Lesson I Learnt

Sometime You Can’t Help But Make Money from Stocks. Is That Time Now?

The BSE-Sensex is down almost 1,000 points over the past 3 days alone. Newspapers have started shouting out – “India, tottering and sputtering”.

Some are calling this crash a “tragedy”, while there are others who are describing it as a “disaster” for investors.

And then, of course, there are many who are predicting that the future is going to get worse and that investors must stay on the sidelines till the dark clouds disperse.

Anyways, before we move further, here is a snapshot of the 4 major falls – the tragedies and disasters – the Sensex has seen over the past 15 years.

This first major drop came after the dot com boom bust in early 2000. The Sensex dropped 56% in a matter of 19 months. [Read more…] about Sometime You Can’t Help But Make Money from Stocks. Is That Time Now?