31st October 2006, 03:58 pm
The following is an excerpt from chapter 19 of The Little Book of Value Investing by Christopher Browne
Chapter Nineteen: When Only a Specialist Will Do
How do you pick a money manager?
The purpose of this book has been to explain the tenets of value investing so that you can benefit from the investment strategy that has been shown to have the best long-term success. You may or may not choose the do-it-yourself route.
31st October 2006, 02:37 pm
by John Authers/ BS
| Is the rule of 20 back in force? This measure was popular in the 1950s and 1960s in the US, stating that the price/earnings multiple to pay for a stock could be derived by subtracting the current inflation rate from 20. |
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The rule worked well, and was aligned with investment logic – if inflation is higher, a company’s future earnings are worth less now, and so they should attract a lower multiple.
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Additional Readings:
Additional Reports:
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Parting Thought:
- Read Ben Graham and Phil Fisher, read annual reports, but don’t do equations with Greek letters in them. - Warren Buffett
30th October 2006, 05:58 pm
Source: ET IG
Even though it’s been three weeks since the Sensex scaled a new high, the Nifty is yet to post one of its own. But the Nifty has made a new high for its 20-week-old rally, at 3747. Though it’s got its digits right, the Nifty is still 27 points short of 3774, its May ’06 high. A non-random look at price action: When we celebrated the new life high of the Sensex in this column three weeks ago, we also made a case for why and how new highs are greeted with some amount of selling. True to form, the market spent eight days mildly easing back from the highs posted on the three-week-old break-out from 3600/12500
Click here for the full article.
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The unstoppables- Welcome to what could be the biggest ever investment boom in history.
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Finding USD370bn - HSBC
Can India finance her infrastructure needs?
- India may require USD370bn as infrastructure investment to achieve a growth of 8.5%
- This looks extremely unlikely without a huge budgetary expansion
- We expect infrastructure funding to fall short, and growth to disappoint
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The most common cause of low prices is pessimism - sometimes pervasive, sometimes specific to a company or industry. We want to do business in such an environment, not because we like pessimism but because we like the prices it produces. It’s optimism that is the enemy of the rational buyer. - Warren Buffett
29th October 2006, 09:32 am
by Dhirendra Kumar - FE Investor
In the heady days of bull runs, we tend to make far more investment mistakes than in normal times. Sure, most of us make money when the markets are going up, but when the bull-run gets over, we all have stocks and funds which we should not have bought.
It is an established piece of investing wisdom that to make money over the long term, all you have to do is to make sure that you don’t lose it. Or, to put it in a different way, you don’t so much as have to do the right thing as you have to simply avoid doing the wrong things. Makes it sound simple, doesn’t it? After all, avoiding the wrong things must be easier than finding the right things to do, right? Actually, if one looks at the real investing stories of real investors, it turns out that avoiding mistakes is just as hard, if not harder than doing the correct things.
Click here for the full article.
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Parting Thought:
28th October 2006, 05:24 am
Margin of Safety – Risk-Averse Value Investing Strategies for the Thoughtful Investor” is a name of a book written by Seth A. Klarman, a successful value investor. This book is no longer published and sometimes can be found on eBay for more than $1000.
“Investing is serious business, not entertainment.”
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“The market works in every scenario — if rates go down, the market says ’soft landing’, and if rates go up, the market says ‘economy is strong, so profits and earnings are great.” - Barry Hyman
26th October 2006, 04:38 pm
Christopher H. Browne purchases stocks the way a thrifty gourmet buys Delmonico steaks — on sale. When the price sinks to $2.50 a pound, you load up. When it rises to $12.99 a pound, you think about chicken.
You won’t catch Browne buying Google Inc. at 55 times earnings. He prefers down-to-earth operations like Dae Han Flour Mills Co. of South Korea, which he found selling at less than one-third its book value in 2005. Browne trudges through data screens to uncover dull companies with shining balance sheets, and he loves prominent corporations that fall out of fashion.
He is, in short, a value investor.
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24th October 2006, 06:59 pm
Samvat 2063: What’s in store for the markets?
Last Diwali, the Sensex was at 7,944 and today, we are standing at the brink of 13,000. That’s a 62% rise on the Index from last Diwali to this Diwali. There was jolt in between, and the markets went down to 8,800 briefly. But the markets reclaimed all the lost ground and came back to strike a new high just a few days before this Diwali.
Investor and trader, Rakesh Jhunjhunwala, Member of BSE, Ramesh Damani and Shankar Sharma of First Global share their perspective on what is in store for the markets in the future.
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To download the whole programme click here (70.91 mb .flv file)
24th October 2006, 05:14 am
The benchmark Sensex having re-done its gravity defying act for the second time this year, investors need to carefully analyse their portfolio and gauge its riskiness with respect to their own risk tolerance levels. While valuation of companies have seen a re-rating in the last couple of months (after the crash in May), there are several macro-economic factors that seem to contradict the sustainability of the same.
Additional Readings:
- Will Tata-Corus deal go through?
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Technically speaking - If the Sensex crosses 13K, trust the benchmark to rally once again to vertigo inducing 25K levels within a couple of years. Otherwise, be satisfied with modest gains or even some losses.
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Equity: Sparklers for your portfolio - One of the lessons coming out of the June 14 debacle when the market slid to 8,900 levels is that the Indian markets have developed resilience. Domestic mutual funds and institutions have the wherewithal to support the market and the FIIs can provide speed or momentum at best. In fact, from January onwards, FIIs have only invested around $5.1 billion as compared to $10 billion in 2005.
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Crisil: Creating ripples - Crisil’s rating standards are used as benchmarks, both domestically and globally. Its transition from a mere ratings service to a
comprehensive knowledge-based solutions provider can be a major driver of earnings.
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18th October 2006, 01:55 pm
Unlike the South East Asian economies that largely depend on exports and international tourism for growth, unlike the Middle East that is largely dependent on oil to fuel their economies, unlike the South American economies that rely on natural resources and exports to US, unlike China where growth is not an issue but transparency is, India offers a much wider theme for investors that is leveraged on its strong domestic populace and growing relevance in the global arena.
While this is not to say that India is insulated from global factors, in our view, the economy is likely to be relatively less affected by what happens in the US. In our view, there are three broader themes, which an investor could base his/her investment decision in Indian equities. We have listed the name of companies under each of the theme (the list is aimed at highlighting key players in the sector and is not aimed at recommending the stock to buy/sell).
Click here for the full article.
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The Tata Steel bid for Corus:
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18th October 2006, 04:33 am
The May massacre may give reason to be wary, but there seems to be a lot of action left in them
by Indranil Deb - DNA Money
Recent reports in the media have been somewhat critical of fund managers - pointing out that mutual funds have missed the upside of the recent bull-run that pushed the Sensex to its all-time high. Reportedly, out of the aggregate assets under management of around Rs 1 lakh crore earmarked for equity, funds were sitting on cash to the extent of 15%, or Rs 15,000 crore.
But, why have MFs failed to capitalise on the bull-run? The fund manager could well be the proverbial scapegoat. But, to be fair, the fund manager cannot entirely be faulted for treading this path of caution.
Click here for the full article.
