Investing

This page contains our best articles on the subject of value investing and investment behaviour.

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Cheat Sheet for Investing Your Money (Free E-Book)

“Go to college, study hard, get good marks, land up in a decent job and you’re settled.”

The world around us has changed but this advice hasn’t.

The concept of getting good grades and finding a good job is an idea whose time has passed. It is not a bad advice but we need new ideas and different kind of education.

In the long term, the old advice is not just insufficient but downright risky.

We have been taught, and taught pretty well, how to work hard to earn money. But what about making our money work hard for ourselves? Every rupee that you earn has in it the seed to multiply into thousands. You just have to know where to sow that seed and how to water it.

The only way to learn that is to start on the path of self-education. A wise man said – “School education will earn you a living but self-education will make you a fortune.”

It does not matter where you stand today. Whether you are a student, in a job, a professional or even unemployed, you have the ability to educate yourself and take control of your personal finances.

If you are reading this, my guess is that you have already spent some time looking for the answers to your financial and investment queries. Therefore, you are a seeker who has already taken the first few steps.

Annual Report Review: Gruh Finance

In continuation of this series on annual report review, here is my review of the FY15 report of India’s leading non-banking financial company, Gruh Finance.

Click here to download the PDF review (11 MB file), or read it in the panel below.

Let me know your thoughts and questions on this review in the Comments section of this post, plus any additional thoughts from your own review of Gruh’s FY15 annual report. Also share any suggestion(s) you may have to make future reviews better and easier for your understanding.

Statutory Warning: This is NOT an investment advice to buy or sell shares. Please make your own decision, as blindly acting on anyone else’s research and opinions can be injurious to your wealth. I do not own the stock, but despite this, my analysis may be biased, and wrong. I have been wrong many times in the past. I am a registered Research Analyst as per SEBI (Research Analyst) Regulations, 2014 (Registration No. INH000000578).

Latticework of Mental Models: Feedback Loops

Few weeks back, Vishal was conducting the Art of Investing workshop in Bangalore and he asked me to speak on the subject of human behaviour and how it relates to investing.

Now, unlike him, I am not used to speaking in front of a large audience. Although it was a room full of around 50 people, but for me anything more than two is a crowd. So to say that I had butterflies in my stomach would be an understatement. It felt like flying horses in my belly.

Finally when Vishal handed over the mic to me, one part of my brain was trying hard to control my shaking legs, the other part was busy adjusting (with trembling hands) the microphone attached to my shirt.

Just when the first word came out from my mouth, a loud screeching noise echoed in the room. For a moment I thought that my heart, which by that time was pounding hard against my chest, had come out. Then I realized that the loud noise was coming from the speakers. I immediately cut it by covering the mic with my hand.

It’s a pretty common problem (sound from the speakers feeding back into the microphone, and then going in an unending loop between speaker and mic, often causing a loud squeal) and most of you must be familiar with this kind of audio feedback noise. This acoustic problem can be easily corrected by tuning the instruments and using few filters. But what’s fascinating about this feedback loop phenomenon is that it pervades almost every other natural as well as man-made systems.

So let’s explore this mental model i.e., Feedback Loop, and see how it can help us understand the world around us.

The Tale of Two Fathers

First, please ignore the “father” in the headline because this is a story about “parents”. But I couldn’t find a better headline, and thus this one.

Anyways, over the past four days, I’ve read two contrasting stories on the relationship between parents and children.

The first came from Aninda Baruah, who wrote about Google’s new CEO Sundar Pichai, who was born and bred in India. Aninda wrote about how Sundar’s parents sacrificed a lot to ensure that he got all the facilities for education. Almost all the money that his parents had saved was used to buy tickets for Sundar to fly to the US for his scholarship Master’s degree. [1]

He concluded his story thus…

…Sundar Pichai (or for that matter Satya Nadella, Indra Nooyi, Adobe CEO Shantanu Narayen), does not just owe his success to his IIT engineering degree, or Stanford University or Google. He owes it to that entire generation, including his parents, that created the culture of extreme personal sacrifice in favour of educating us.

Reading Sundar’s story, I’m sure his parents not only used their money to help their son, but also sacrificed their time to be with him through the most important times of his upbringing.

Anyways, the second story I read was from Devdutt Pattanaik, who wrote about Samba, the son of Lord Krishna and Jambavati. [2]

Annual Report Review: Ashok Leyland

In continuation of this series on annual report review, here is my review of the FY15 report of India’s leading commercial vehicle company, Ashok Leyland.

Click here to download the PDF review (9 MB file), or read it in the panel below.

If you wish to submit such reviews of annual reports, I would be happy to share the same with other tribe members. Just prepare them in the same format I am doing (make your notes on the report itself, scan them, convert to PDF file, and email to me).

It will be a good practice for you on how to read and analyze annual reports, plus the tribe will benefit. 🙂

Let me know your thoughts and questions on this review in the Comments section of this post…and also share any suggestion(s) you may have to make future reviews better and easier for your understanding.

Latticework of Mental Models: Do Something Bias

Note: This article first appeared in the March 2015 issue of our premium newsletter, Value Investing Almanack.

Do you remember Dr. Placebo and Mr. Irrational?

They teamed up for our discussion on Mean Reversion, but kind of disappeared after that.

Although Mr. Irrational did come back for Contrast Mis-Reaction but Dr. Placebo, who runs a thriving practice, has been finding it hard to take out time from his busy schedule. So this time I made him an irresistible offer. Vishal and I offered him a discount on Value Investing Almanack subscription, which he just couldn’t refuse.

As far as Mr. Irrational is concerned, he’s my buddy, almost like my alter ego. So he has to come when I ask.

Let’s enter Dr. Placebo’s clinic. He has this very interesting quote, uttered by famous scientist Blaise Pascal, displayed in the patient waiting area –

All of humanity’s problems stem from man’s inability to sit quietly in a room alone.

He hopes that his waiting patients learn something from this deep thought, but little does he realize that more than his patients, he is the one who needs to meditate over Pascal’s quote.

Announcing: Safal Niveshak Meetups

In his magnificent book, Think and Grow Rich, Napoleon Hill wrote –

No two minds ever come together without, thereby, creating a third, invisible, intangible force which may be likened to a third mind…When a group of individual brains are coordinated and function in harmony, the increased energy created through that alliance becomes available to every individual brain in the group.

In giving meaning to Mr. Hill’s idea, let me announce a new initiative from Safal Niveshak – Meetups @ Safal Niveshak – to bring the tribe members together, face-to-face, to channel the energy for a shared vision – simplifying the art of value investing and making it available to as many small investors as possible, around the country.

This idea is really simple – To meet regularly in small groups across cities in India…to learn and grow together in our investment journey.

Annual Report Review: Blue Star

In continuation of this series on reviewing annual reports, here is my review of the FY15 report of India’s leading air-conditioning and commercial refrigeration company, Blue Star.

Click here to download the PDF review (10 MB file), or read it in the panel below.

Please note that this review is just to help you dig deeper, in case you are interested to read and understand more of the reviewed company. Don’t treat this as an end to your quest for learning more about businesses and industries, and how to analyze them.

In fact, this is just the beginning. 🙂

Latticework of Mental Models: Tragedy Of Commons

I have never been bitten by a dog (by an unfriendly dog to be precise). However, there were few friendly ones who would chase me for fun. Well it was fun for them but as a kid I didn’t particularly enjoy that kind of sport much.

So when I moved into my current apartment community, housing nearly two thousand flats, it felt nostalgic because the campus had multiple patches of large open areas which meant it was a boon for dog owners (and heaven for their dogs).

Few years back, it wasn’t uncommon to see few fitness conscious dogs taking regular morning and evening walks (along with their disinterested owners) inside the apartment campus. But as the resident population grew, the population of pets followed suit. Pretty soon, it became a common practice for dogs to relieve themselves anywhere in the campus.

The pet owners perhaps assumed that cleaning was a responsibility of maintenance staff which resulted in a campus littered with dog poop everywhere. It was ironical that the mess was equally disturbing for all residents (including those offending dog owners) but it was quite logical, in absence of any specific laws about pet poop mis-management, for people to keep their houses clean and compromise with the common area.

I couldn’t help but marvel at Aristotle’s insight about this issue. He said –

What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others.

5 Things I Learned from Jeff Bezos on Business and Investing

It was 18 years back when Amazon, the world’s largest bookseller and one of the most successful Internet companies, got listed. The company’s IPO was unique for two reasons.

One, that was a period before the dawn of Internet businesses, and thus most investors and brick-and-mortar competitors were convinced the company was a joke – an “Internet bookseller” with “no barriers to entry”. Michael Porter’s framework said it would go bust quickly.

Then, Amazon’s founder and CEO Jeff Bezos was extremely frank with shareholders from the word go, which is truly unique in this world where CEOs hide more than they reveal.

So, in 1997, after the IPO, Bezos wrote an honest letter to shareholders in which he explained Amazon’s philosophy, which was (and is) quite different from the philosophies of most public companies.

Why different?

Because, unlike other public companies that were (and are) obsessed with meeting and beating short-term shareholder demands, Bezos’s game plan was (and is) focused on long-term investments and value creation.